DENMARK – PensionDenmark is to increase the temporary account interest rate for 2006 to 6% from a previously decided 5% - thanks to higher than expected returns.
The account rate is the rate of interest that members get on their savings for life-long pension, for which 50% of premiums are used - the rest being used for capital pension and pension in instalments which are both unit linked and therefore get an investment return each year.
“The objective is to set a relatively stable rate each year to secure a smooth development in this type of savings,” said spokesman Jens-Christian Stougaard.
“Last November the board set the account rate for 2005 at 5.5% and for 2006 provisionally at 5% in expectation of a return that was lower than eventually achieved,” Stougaard added.
“PensionDanmark therefore accumulated higher reserves than anticipated,” he said. “As it is our view that funds are best placed in members accounts, the board has decided to raise the provisional account rate for 2006 to 6.0% from the earlier pencilled in 5.0%.”
The fund said that even with the higher account rate, its reserves are higher than they were expected to be in November 2005 and are more than seven times higher than the legal requirement.
“By taking this step PensionDenmark has placed itself at the top among the pension funds that have announced their account rate for 2006,” Stougaard added.