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ATP draws DKK23bn from reserves to fund longevity

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DENMARK - Denmark's ATP is setting aside an additional DKK23bn (€3bn) for future pensions payments after adopting new longevity measures, which takes into account projected future increases in life expectancy.

The scheme's supervisory board decided yesterday to earmark the sum, in order to cater not only for current Danish life expectancy, but also for the expected ongoing increases in the projections.

Lars Rohde, chief executive of the DKK516bn Danish labour market supplementary pension scheme said: "By allocating an additional DKK23 billion, we want to further future-proof the ATP Lifelong Pension for current as well as future pensioners."

The new longevity model ATP has developed uses data volumes one hundred times greater than have previously been used for such models in Denmark, it said.

"By staying one step ahead of the increase in life expectancy, we are giving our members added reassurance that we will keep our promise - although more and more Danes will live to be 90 or 100," Rohde said.

The new model called SAINT - which stands for Spread Adjusted International Trend - draws on comparable data from 18 OECD countries and makes it much easier to assess life expectancy trends for various age groups, and to determine a more stable forecast of long-term life expectancy patterns, the pension fund said.

Since the 1980s, ATP has set aside DKK43bn to provide for the observed increase in life expectancy.

With the expected increase in life expectancy for its 4.6m members now calculated as costing DKK37bn, of which DKK14bn had already been allocated, the scheme completed its funding by announcing the additional DKK23bn.
 
The money set aside will come from ATP's reserves, and could otherwise have been used to increase pensions, it said.

"Instead of increasing the ATP pension, we are extending it. We need to keep our promise - to the 20-year-old as well as the 95-year-old," said Chresten Dengsøe, chief actuarial officer at ATP.

According to ATP's new projections, the remaining post-retirement life expectancy of a 60-year-old man in Denmark is three years longer in 2010 than it was in 1990; for women it is two years longer.

It expects this trend to continue, meaning that over the next few decades, the remaining life expectancy of 60-year-olds will rise by about one year each decade, so that in 2050, the average person of 60 would have a four-year increase in life expectancy compared to that for today's 60-year-old.

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