Denmark's Industriens posts 19% pre-tax return for 2010, lowers account dividend
DENMARK - Danish labour-market fund Industriens Pension has set its 2011 pre-tax account dividend lower than last year at 5.25%, on the back of a 2010 investment return of 12%.
Laila Mortensen, managing director of the fund said: "The return on our investments was around 12% in 2010, and we have covered our future obligations. So even though interest rates have fallen this year, our reserves are intact.
"Therefore we can give members a good yield as well as putting money aside for poorer times," she said.
Industriens Pension covers workers in the industrial sector and had total assets of DKK90.6bn (€12.2bn) at the end of November.
In Denmark, the account dividend is the widely-compared headline rate paid on customer's pension accounts. In 2010, Industriens set an account dividend of 7% before tax. After tax, the 2011 payout is 4.5% against 2010's 6.0%.
The pension fund pointed out that the account dividend could be reduced if the financial developments in 2011 differed significantly from its expectations.
Mortensen said the fund's reserves totalled DKK17bn at the beginning of December. "This gives us room for manoeuvre to take those risks that will lead to the highest returns, without putting members' pensions on the line," she said.
After hedging for future obligations, the pre-tax return was around 19% for 2010, Industriens Pension said, adding that hedging activities had therefore produced a positive result because of the fall in interest rates.
Rising rates have a negative effect on the post-hedging return, it said, adding that this happened in 2009, leading to a 13.0% return after hedging, compared with 22.4% before taking account of these activities.
Among other labour-market pension schemes in Denmark, Sampension last month announced it was increasing the account dividend on one of its pension schemes while keeping the rate flat on another.
Account dividends on plans set up at Sampension before 1997 would stay at 4.75% for 2011, before tax, while the dividend on later plans would rise to 2.75% from 2.51%.
Yields announced by the country's major commercial providers for 2011 were maintained at last year's levels. Danica Pension and Topdanmark Liv set their account dividends at a pre-tax 3.25% while Nordea Life & Pension's account dividend is remaining at 3.75% before tax.