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Danish roundup: FSP Pension, Lærernes Pension

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DENMARK - Denmark's FSP Pension suffered a net loss of more than half a billion kroner after shouldering heavier demands on capital and higher levels of risk coverage, despite reaping double-digit returns for the quarter of members with unit-link pensions.

The labour-market pension fund, which covers financial sector staff in Denmark, reported a total investment return of DKK1.5bn (€201m), compared with DKK800m in 2009. This translated into returns of 16.6% for members with a unit-link pension and 6.6% for those with a traditional with-profits product.

However, at the group net result level, FSP Pension reported a loss of DKK585.1m for 2010 after DKK0.2m profit the year before.

In a statement on its annual results, the fund said: "FSP's management does not think the net result for 2010 is satisfactory, but it reflects the fact FSP Pension has a significant portion of members with traditional savings, with an average rate of interest and a minimum yield guarantee, and the fact the financial crisis has led to an increased demand for safety in pension savings."

The investment return was channelled in several ways, the fund said. It added DKK678m of interest to customers' pension accounts, re-established the collective bonus potential of premium-free pensions of DKK570m and increased pension reserves to their market value of DKK570m.

The increase in reserves was particularly due to falling interest rates and rising longevity, which meant pension savings with a yield guarantee will now have to stretch even further, it said.

In January, FSP released investment returns for its unit-link pension products FSP Vælger. The products yielded annual returns of between 13.3% and 25.7% depending on the risk profile chosen by the member.

However, three-quarters of FSP's membership still have a traditional pension plan, with a minimum yield guarantee rather than a unit-link pension.

FSP Pension said: "The significantly lower return for the traditional pension is due to risk-management demands, which make it necessary to limit higher risk investments such as equities."

Total assets under management rose to DKK24.2bn from DKK21.7bn, while pension reserves climbed to DKK18.1bn from DKK16.7bn.

Membership was broadly static at 17,192 after 17,162 in 2009.

Meanwhile, the Danish teachers' pension fund Lærernes Pension reported 2010 pre-tax profit of 11.1% after 12.9% in 2009, saying the result was boosted by equities and higher-risk corporate bonds.

Paul Brüniche-Olsen, managing director of the labour-market pension fund, said: "We achieved the 11.1% result for many reasons. In general, the market development has been good, and we earned extraordinarily well on the higher-risk investments."

Higher-risk corporate bonds returned 17% after 56% in 2009, the fund said. Equities produced a return of 23%.

In absolute terms, the investment return was DKK3.9bn, up slightly from DKK3.7bn. Assets under management rose to DKK43.1bn from DKK37.4bn. Total contributions were up at DKK3.9bn, after DKK3.7bn the year before.

Membership climbed to 131,801 at the end of 2011, up 4,817 from the year before.
The pension fund also said it was expanding its property investments in 2011.

"We have stayed at a very low level with our real estate investments for several years because the return we were able to achieve was too low," said Brüniche-Olsen. "Now the property market has got to a more realistic level."

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