DENMARK - Profit at major commercial pension provider Danica Pension shrank to DKK100m (€13.4m) in the first quarter of this year from the DKK600m reported the same time last year, as rising bond yields weighed on the investment return.
Contributions rose to DKK7.1bn in the three-month period, up from DKK6.5bn in the first quarter of 2010. Figures are for the group, not just the parent company.
Danica Pension managing director Jørgen Klejnstrup said: "We have had a solid increase in contributions of 10%, and it is positive that the Danish part of the business is now also growing nicely, from DKK4.5bn in the first quarter 2010 to DKK4.9bn in the first quarter 2011.
"We have also had good inflows from our foreign units, among which Sweden has shown particular growth."
Explaining the drop in group profit, Danica Pension said fundamental business had gone well in the quarter, with a good increase in contributions within the corporate market and a fall in the cost ratio, but bond yields had not helped.
The group said: "The fall in profit is primarily due to a low return on investment as a result of the rise in bond yields, as well as a decision not to include the entire risk allowance for the first quarter 2011, because of the prospect of bond yield rises during the remainder of the year."
In other news, the Danish pensions industry has hit out at a labour-movement proposal to introduce an upfront tax on pension contributions, calling it a "dangerous fix" to mend the hole in state finances.
The idea has been put forward by the Economic Council of the Labour Movement (Arbejderbevægelsens Erhvervsråd), a think-tank funded by the Danish LO (the Danish TUC).
Per Bremer Rasmussen, managing director of industry body the Danish Insurance Association (Forsikring & Pension), said: "Upfront taxation is a dangerous fix, which could smash Danes' savings.
"At the moment, we are encouraging Danes to save - with tax deductions and deferred tax. If we instead taxed upfront, we could easily undermine confidence in the system."
He acknowledged that Denmark faced serious economic problems, but said these would become even greater when the bigger generations of old people retired.
"The last thing we need is conjuring tricks that move money from one date to another," he said.
Bankpension, the Danish labour market pension fund for bank employees, is set to boost its membership base by more than 8% following a merger with the pension fund of an individual bank.
Staff and former staff at Arbejdernes Landsbank opted at the AGM of the Pensionskasse for Arbejdernes Landsbanks Personale to merge the pension fund with Bankpension - a move that will see its 1,350 members transferring their pensions to Bankpension at the start of 2012.
Ebbe Castella, director of Arbejdernes Landsbank and chairman of the bank's pension fund said: "We can both see new possibilities and significant economic advantages of moving our pension scheme to Bankpension. It is a big decision, and so it has also been considered very thoroughly."
Bankpension currently has 16,500 members and manages assets of around DKK15bn.
The final decision on the merger will be taken at an extraordinary general meeting at the Pensionskasse for Arbejdernes Landsbanks Personale, Bankpension said.