The planned wedding between engineering sector pension funds DIP and ISP has been postponed – but the engagement is still on. The two pension funds and the IDA association of engineers were unable to agree on a final merger deal, but have signed a letter of intent. According to the agreement, progress on a merger between DIP and ISP is being pushed back until a merger between DIP and JØP, the lawyers and economists' pension fund, has been completed, which is expected to happen no later than Jan. 1, 2019.
"When the merger between DIP and JØP is finalized, we will begin work on the subsequent merger with ISP. The criteria for this is that the expected potential of the mergers, in the form of cost savings for example, can be realized. The subsequent merger is expected to be final with effect from Jan. 1, 2020," the agreement reads.
Thomas Damkjær Petersen, president of IDA, is pleased with the outcome of the negotiations. "I am satisfied. We have reached an agreement. We are working towards a merger between three pension funds, and I am very pleased with that. All three parties are in," he says to FinansWatch.
IDA: "The direction is what matters"
The IDA president's original plan was for a merger to be in place by April 2018 when the agreement between IDA and the public authorities is to be negotiated. However, Thomas Damkjær Petersen takes the two-year postponement in his stride.
"I don't have a problem with it. The direction is what matters and the groundwork for that has laid. Jan. 1, 2020 is fine, and we have a point in the agreement that says it is one pension fund which we support in the future from IDA. So I've done what the executive board asked of me, "he says.
When Thomas Damkjær Petersen announced this spring that IDA wanted DIP and ISP to merge, he made it very clear that he wanted a merger agreement in place during the fall of 2018 so that it could be voted on at extraordinary general assembly before year-end.
How do you feel about the fact that you signed a letter of intent and not a real merger agreement like you wanted?
"All parties have sacrificed something so that it could be done. And I think it's a very satisfying result that on Jan. 2, 2020, we will have a merged pension fund that is also merged with JØP. So we will have very good economies of scale," Thomas Damkjær Petersen says.
But a letter of intent is also a solution if you don't want a merger later. It also states that it must be sensible in terms of cost-effectivness. Is this a stagnant merger agreement?
"The agreement states that the parties have been working closely together to find out what the savings consist of. Both parties have acknowledged that the it must be present after merging with JØP. I don’t think any of us are in doubt that it is," says Thomas Damkjær Petersen.
"But it all has to be approved too at member assemblies. If anybody voted no at one of the general meetings, then we have a different situation. But we don’t see that happening."
So you see this as a first step towards a real merger agreement?
"I have no doubt that it is. We are on the way," says Thomas Damkjær Petersen.
Cutting the connection to the ISP
The agreement also states that ISP does not take in any new public employee members from April 1, 2018. The next agreement will state that all future public sector engineers will have a pension scheme in DIP. Thus, Thomas Damkjær Petersen has made good his promise that if a merger is not in place by April 2018, one of the pension funds will be cut off from new members.
"It is to signal from IDA to everyone - including members of the two pension funds - about the direction we’re going. And it's also technically easier to do that with the agreement in 2018. So that's both a signal, but it's also practical like that," says Thomas Damkjær Petersen.
For the past few weeks and months, there have been no comments from the three presidents at DIP, ISP and IDA, respectively. Have there been any intense negotiations?
"I think we have had constructive negotiations and landed something that everyone likes. When all three boards have to be consulted, such a thing takes time, "says Thomas Damkjær Petersen.
English Edit: Marie Honoré