Danish roundup: F&P on unit-link pensions, Unipension
DENMARK - Unit-link pensions accounted for 43% of total pension contributions in Denmark last year, as overall customer payments into the products continued to gain ground over traditional with-profits plans, according to new data from industry association Forsikring og Pension (F&P).
This trend towards unit-link pensions was in line with the pact sealed between the Danish government and the pensions industry in June, F&P said.
In 2011, 43% of total pension contributions went into unit-link products, with the proportion having doubled over five years.
In absolute terms, Danes paid almost DKK65bn (€8.7bn) into with-profits pensions last year compared with nearly DKK50m paid into unit-link plans.
The proportion of total provisions underlying unit-link products rose three-fold over the last five years, to 23% in 2011, according to the data.
Carsten Andersen, deputy director at F&P, said: “The migration of more customers from with-profits pensions to unit-link pensions is a development that has been going on for several years.”
Many pension companies had developed new unit-link products that appealed to broad groups of customers, he said.
More customers had now become aware that unit-link products gave the best chances of a good pension, he added.
“At the same time, the development is in line with the agreement we signed last summer with the government to increase the opportunities for customers to choose unit-link products and reduce the amount of guaranteed products,” he said.
Traditional with-profits pensions in Denmark - some of which include a yield guarantee - still account for the lion’s share of pension assets in the country.
But because of the high levels of reserves they require the provider to hold, the products are becoming increasingly unsustainable for many Danish pension funds.
In other news, Unipension reported investment returns of around 9% for the year to September for the three labour-market pension funds it runs.
Interim reports for the pension funds - the Architects’ Pension Fund (AP), MP Pension and the Pension Fund for Agricultural Academics and Veterinary Surgeons (PJD) - show that membership numbers and contributions increased at all three in the six-month period.
In absolute terms, the first-half investment return was DKK4bn (€538m) overall for the three funds after tax, Unipension reported.
The pensions administrator said: “Results continued to be good after the end of the first half as well. In the year to date, the return at all three pension funds was around 9%.”
As of 12 September, AP produced a return of 8.89%, MP Pension returned 9.71% and PJD returned 9.54%.
In the 12 months to the end of June 2011, membership numbers rose to 8,135 from 7,990 at AP, to 89,998 from 87,668 at MP and to 9,339 from 9,279 at PJD, Unipension said.
Contributions at the three funds increased respectively to DKK138.9m from DKK126.3m, to DKK1.59bn from DKK1.50bn and to DKK167m from DKK165m.
Solvency coverage at the end of June stood at 982%, 796% and 1,144% respectively.
Unipension said last month that the three schemes had produced first-half investment returns of between 5.4% and 5.9%.