DENMARK - Danish pension policyholders are choosing to use retirement savings plans with a high holding in equities, despite the current economic climate, suggest figures from Danica Pension.
Jens Christian Nielsen, chief economic at Danica, said there has been a sharp increase in the amount of shares held in Danish retirement savings, so if figures from Denmark's largest pension provider Danica are true for the whole market, it would indicate there has been increased interest in equities this year despite the massive depreciation of shares.
Based on an analysis of the Danica Balance "high equity" offering, approximately 27% of customers held equity in 2005, but that has since risen 43.6% of investors.
A survey from TNS Gallup claimed 32% of those surveyed were less likely to invest in securities during the financial crisis last year so evidence suggests Danica customers could be moving against the norm.
Nielsen claimed this indicates Danish investors are more confident about the market and argued this shows customers believe the bottom of the stock market now is about to be reached, adding he believes it is therefore prudent to have invest retirement savings invested in the stock exchange.
That said, Danica has also changed its advice in the direction of combining high shareholdings with a warranty, which can be signed for various periods lasting up to 10 years before and after which the money must be paid.
However, Peter Lindblad from brokering firm Aon Private Consulting, claimed applying such a warrany is "a bad idea", as he added: "To attach guarantees to market products might give you peace of mind, but there is rarely a satisfactory return."
He pointed out the cost of purchasing the guarantee is so high that they will ultimately cost savings hundreds of thousands of Danish kroner as the guarantee merely insures against losing money- in other words it is a guarantee of a zero return.
"Generally, we do not establish a retirement savings in order to achieve a return of 0%. With inflation and costs, it creates a direct negative investment, and we might just as well put the money under the mattress," said Lindblad.