Sampensions afskaffelse af ydelsesgarantierne

Pia Bardrum & Morten Hjorth Hansen

Student thesis: Diploma thesis


Sampension cancelled their interest rate guarantees on their pensions at the 1st of January 2011. This happened because of new solvency regulations that demanded higher capital requirement, which Sampension wasn’t able to accommodate. This thesis analyzes the background of the big increase in Sampensions capital requirement. The Danish life and pension companies are of great importance to the financial stability because of their capital size. This is why they must be regulated to prevent bankruptcy within the financial sector. Solvency II is a new set of solvency regulations that sets a common standard in the life and pensions sector, within the European Union. The primary purpose of the changes is to map the real risks that the companies are exposed to, in an effort to counter future crises. The regulation also aims to strengthen the competition between the companies. Both purposes are ultimately aimed at protecting the customers. One of the biggest capital challenges that the pension companies are facing, is that they have been giving their customers guaranteed pensions commitments based on a high interest rate level. Due to the decline in the interest rate the recent years, it has been difficult for them to accommodate the guaranteed high return. Sampension realized that they had challenges in 2009 when the Solvency II test drive results were available. The results showed that the company would be taken into administration by the competent authorities if they continued to operate unchanged. They tried to figure out other solutions than cancelling the guarantees, but no other options seem to solve their problem. This thesis discusses and analyzes the other relevant options, and their impacts. The termination of the guarantees was met with great criticism among both professionals and the customers. Before the transactions, Sampension had investigated their legal status, and two law professors proclaimed independently of one another that they were entitled to do it. However Sampension got sued, but they have succeeded the trial. The prosecutor is trying to get the trial to Supreme Court, but this hasn’t been successful so far1. The guarantees at Sampension were replaced with intent of keeping the pensions at the same level at originally promised. They do so far seem succeed in doing this. However the customers have lost the safety they once bought and they now have an uncertainty about their future income. The concept of having a guarantee loses its value if you can just cancel it. This thesis also discusses and analyses the role and responsibility of the authorities regarding the issues surrounding the interest rate guarantees. They seem to adapt the rules every time the companies are under pressure. This has an inhibitory effect on market discipline. The finding of this study indicates that Solvency II does improve the financial stability through making the real risk of companies more transparent and thereby protecting the customers. The study also shows that the demanded increase in Sampensions capital requirement was caused by the high proportion of the guaranteed pensions commitments. Through relevant calculations it was possible to conclude that the only option for Sampension to survive was to cancel the guarantees. So far the cancellation has not affected the customers’ guaranteed payout. This is however based on a short time horizon in two and a half years. The study also shows that so far Sampension has been legally upheld.

EducationsGraduate Diploma in Financial Planning, (Diploma Programme) Final Thesis
Publication date2013
Number of pages82