Denmark’s biggest commercial pension provider, PFA Pension, reported higher-than-forecast returns on its unit-link pension product for 2016 and said it was pleased with the results given difficult market conditions.
Anders Damgaard, group finance director at PFA Pension, said: “We are proud we have delivered a return for our customers with market-rate products this year of between 6.5% and 8.2% – particularly in the light of Danish inflation, which is at 0.1%.”
In 2015, returns on the market-rate product PFA Plus ranged from 5.3% to 12.3% depending on customer age and product profile.
The returns are higher than the firm forecast this time last year, when PFA predicted PFA Plus 2016 full-year returns would come in at between 2% and 7% – though it did say this prediction depended on prevailing interest rates staying at their early 2016 levels.
PFA’s with-profits or average-rate pension product returned 6.7% in 2016, according to the early financial figures.
The firm said interest-rate hedging and the bond portfolio contributed the most to the with-profits pension return, though corporate bonds, alternatives and real estate had also made positive contributions.
Damgaard said that, in the light of an investment environment of low or negative interest rates and uncertainty on the stock market, a central element of PFA’s investment strategy was to find good alternatives to shares and bonds.
“PFA has therefore strengthened its skills in alternatives investments and expects to expand its investments in, among other things, property, infrastructure – for example, via public/private partnerships – and sustainable energy,” he said.
Meanwhile, labour-market pension fund Sampension reported that returns on its market-rate pensions had bounced back in 2016, to end the year between 5.4% and 9.7%, depending on customer age and risk profile.
In 2015, Sampension made losses of between 0.1% and 1.8% on its market-rate product.
The pension fund said: “Sampension ended the year with a good plus in all three asset classes – equities, bonds and alternatives – despite the ultra-low interest rates in the year and turbulence on the equity markets.”
Brexit and the election of US president-elect Donala Trump had been two of the year’s most important political events on the financial markets, it said.
“But, despite the enormous media discussion, neither the British ‘no’ vote to the EU nor the Americans’ ‘yes’ vote for Trump had great significance for the return,” Sampension said.