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Danish pensions buoyed by investment returns

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  • Danish pensions buoyed by investment returns

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DENMARK - Improved investment results have boosted returns at several of Denmark's pension funds in the first half of the year, but weak workforce mobility and job losses have hit contribution and transfer income for some funds.

PFA Pension reported a pre-tax investment return of DKK 1.8bn (€242m) for the six months to the end of June, up from a loss of DKK 4.94bn in the year-earlier period. The fund's pre-tax profit rose to DKK 247m from a DKK 195m loss. Total assets rose to DKK 227.45bn from DKK 211.79bn.

Total pension contributions fell 2.2% to DKK 7.3bn compared to last year's first half because of incoming transfers, PFA said. Transfers were 31.4% lower at DKK 985m.

"Incoming transfers fell back significantly in line with the halt in mobility in the labour market," it explained in the first half report.

Industriens Pension saw a marked fall in contribution income to DKK 2.57bn in the first half from DKK 2.97bn, blaming this drop on the number of members currently making payments.

But Industriens pointed out that although its actively contributing membership had fallen by more than 18,000 in the first half, this retreat would be offset by its recent merger with PNN PENSION and PHI Pension. The merger will bring more than 50,000 members in, of which around half are active contributors, it said.

Investments returned a pre-tax DKK 1.13bn, up from minus DKK 1.71bn a year before. Profit rose to DKK 86m against a DKK 17m loss. Total assets rose to DKK 62.17bn from DKK 61.78bn.

"The improvement in the global economy is expected to hold in the second half, which will contribute to a positive equities result," Industriens Pension forecast. "But a likely simultaneous rise in yields will reduce the profit as a result of provisions on the liabilities side," it added.

Meanwhile, financial sector pension provider FSP saw its pre-tax loss narrow to DKK 184m from DKK 883m in the first half 2008. The fund's investments resulted in a loss of DKK 649m before tax, improving on the DKK 802m negative return the same period a year before. Total assets for the group fell to DKK 20.54bn from DKK 20.74bn.

The investment return for members in FSP's traditional plan was minus 3.3%, against minus 11.1% a year before.

However, ongoing pension contributions rose by 5.7% in the first half, and customer numbers remained at around 23,000, the provider said, even though the banking sector had shed more than 1,000 employees in the period.

"It is positive that several of FSP Pension's member employers have had the financial strength to take on staff through acquisitions in a period of very difficult conditions in the financial sector," said Steen Jørgensen, managing director of FSP .

PensionDanmark said the stabilisation of the global economy since March had provided good rises in prices of both shares and corporate bonds. Its investment return rose to a positive DKK 3.4bn in the first half 2009 from a negative DKK 4.4bn a year earlier.

In percentage terms, the pension provider's pre-tax return on investments rose to 4.5% in the first half, up from a 6.1% loss, but by the end of August this profit had more than doubled to 9.5%, it said.

That said, the market outlook was still causing concern. "The uncertainty remains significant, and we are maintaining a relatively cautious investment strategy," said managing director Torben Möger Pedersen.

The number of PensionDanmark members making contributions was 25,000 less in June than at the same point the year before, the provider said. But contribution income nevertheless rose by 3% to DKK 5.2bn because of strong growth in incoming transfers, it added.

PensionDanmark's total assets rose to DKK 78.5bn at the end of June 2009 from DKK 70.8bn a year earlier.

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