Denmark backtracks on limiting contributions to 'life-long pensions'
EUROPE - Denmark's new government stepped back from limiting contributions into life-long annuity pensions in its 2012 budget proposals - a move welcomed by country's pensions industry association.
The Danish Insurance Association (F&P) said it was important the government have a sharp focus on creating the right encouragement to save for pensions.
In a statement, F&P said: "Against that background, the Danish Insurance Association is satisfied that the originally planned DKK100,000 (€13,430) ceiling on contributions to life-long pensions (livsvarige livrenter) has gone - and has been replaced instead by the lower ceiling on annuity pension schemes (ratepensioner)."
Per Bremer Rasmussen, managing director at the association, said: "Danes are luckily living longer and longer. So it is essential they save up enough for their whole lives and do not risk running out of money."
He added: "This is exactly why the tax commission kept life-long pensions free from a ceiling in its recommendations.
"It is good the government has come to the same conclusion - that we should safeguard a simple, cheap and shared pension system, where everyone is ensured a reasonable pension that relates to their prior earnings."
In the budget unveiled at the end of last week, the ceiling on annuity pension schemes was lowered to DKK55,000 a year from DKK100,000 currently.
The government calculates this step will increase revenues by DKK1.5bn a year for 2012 and 2013.
Labour-market pensions administrator Unipension was also happy the government had dropped plans for a limit on life-long pension contributions.
Managing director Cristina Lage said: "When we look at the social and economic challenges that are there, such as rising Danish longevity and fewer hands in the labour market, a ceiling on life-long pensions was not something we needed.
"We could also have done without the lowering of the limit on payments into annuity pension schemes for these reasons, but the most important thing was that the government recognised life-long pensions are the savings form of the future."
Another measure affecting pension funds in the budget was the decision to abolish the tax deduction for asset management costs within pension schemes.
The government expects this change to reap DKK390m in extra revenue in 2012 and DKK370m the following year.
Lage said: "This means active asset management will become less advantageous, for pension funds and others."
Bremer Rasmussen said removing the tax deduction would make it more expensive to invest actively in Danish businesses.
"This goes in the opposite direction to what Denmark needs - increased growth and more public-private partnerships," he said. "The perspective is wrong."
However, Lærernes Pension - the pension fund for teachers - calculated the effective increase in tax would only cost its members DKK1 extra each month.
The fund's managing director Paul Brüniche-Olsen was pleased the planned cap on life-long pension contributions had come to nothing because it would have "undermined the social purpose that labour-market pensions have taken on".
Commercial provider Danica Pension has told its customers that if they pay more than the maximum amount into their annuity pension scheme - if and when the new proposal becomes law - the excess will automatically be channelled into a life-long annuity pension product.