The global upturn on the stock markets in 2021 has grown the savings of PensionDanmark’s 790,000 members. Denmark’s largest labour market pension fund delivered a total return of DKK 36.4 billion to the members with returns of between 10 and 16 per cent for all age pools. For a typical PensionDanmark member, with 12 years of contributions, the sum of the monthly contributions and returns increased savings by close to DKK 150,000 in 2021.
”I is a very positive result, which provide our members with a high degree of economic assurance when they retire. The combination of attractive returns and total cost at the low end is the recipe for good savings,” says Torben Möger Pedersen, PensionDanmark’s CEO.
Members’ administration cost in 2021 (as well as the year before) was DKK 297, and investment costs were on average 0.5 per cent of savings. The low total cost implies that contributions and returns constitute a relatively large proportion of members’ savings each year, which subsequently generate more returns.
Looking at asset classes, equities in particular lifted the returns. The return on listed equities was 20.7 per cent and 37.4 per cent on private equity, which strongly contributed to the returns for all age pools in PensionDanmark. The return for members under the age of 46 was 16.0 per cent while the return for 67-year-old members was 10.3 per cent.
Even if the global upswing on the stock markets should not continue at the same pace in the coming years, PensionDanmark’s CEO feels well prepared to navigate to the advantage of members.
”We should prepare ourselves for lower and more volatile returns on the financial markets in the coming years. One of the reasons behind this is the prospect of increasing interest rates due to rising inflation in Denmark as well as internationally. But we are confident that our investment strategy with focus on diversification through investments in for instance green infrastructure and real estate constitutes a solid base," Torben Möger Pedersen points out.
Facts: Return on PensionDanmark’s age pools (middle risk) in 2021
Age pools: (2021 / 3-year average)
45-year age pool: 16.0% / 13.2%
55-year age pool: 15.4% / 12.1%
60-year age pool: 13.2% / 10.2%
67-year age pool: 10.3% / 7.7%
The difference in returns of the age pools is the result of higher investment risks for younger members with more years to retirement. A larger proportion of their savings are placed in equities than is the case for members who are closer to retirement.
On average, the savings for a PensionDanmark member, with 12 years of contributions, has grown by around DKK 150,000 in 2021.
Hereof close to DKK 110,000 is return on PensionDanmarks manangement of the savings, while contributions accounts for around DKK 40,000.