DENMARK - Interest-rate hedging helped Sampension achieve a record high return of 20.3% on traditional with-profit pension plans last year, the labour-market scheme said.
The investment return is up from the 16.2% profit the scheme made in 2010.
Hasse Jørgensen, managing director, said: “Our traditional pension plans achieved an unusually high level of return of more than 20% in 2011.
“With this, Sampension has set a new record for profit - which has not been higher for many years, to my knowledge.”
The result was very satisfactory in a market characterised by great uncertainty, he said.
“The result can be attributed in large part to the hedging we have carried out against interest-rate falls, and the large profit offsets the much higher need for reserves, which is a consequence of the low level of interest rates,” Jørgensen said.
Unit-link pension plans saw lower but positive returns for 2011.
Pre-tax profit in the ‘3 in 1’ lifelong pension product ranged from 0.9% to 6.5%, depending on the age group.
The year before, profit on the unit-link side of the business had been higher, ranging from 12.6% to 9.1%.
Sampension said the main factor in these return levels was falling interest rates.
Another factor was alternatives, including private equity and private equity funds, which had proved their worth by adding strong, stabilising profit to the portfolios when global markets began to fall, it said.
Jørgensen added: “The alternative investments have slightly higher costs than quoted equities, but the money has been well spent and is a significant factor in giving our customers such a good return.
“Sampension traditionally holds a higher proportion of private equity and other alternative investments than is the case for the pensions market in general.”
In other results news, pensions provider PenSam Liv - the largest unit in the PenSam group - reported an investment return of DKK5.2bn (€700m) in absolute terms, or 10.9%.
Within the overall return, investments behind the older ‘Tradition’ with-profits plan produced 15.7% in 2011, up from the 9.3% reported for 2010.
The newer ‘Fleksion’ product returned 2.2%, down from 11.4%.
PenSam said the returns vindicated its strategy of more property and infrastructure, plus investment in mortgages bonds.
Director Helen Kobæk said: “It has been a challenging year for investment, and so it is satisfying to be able to confirm PenSam Liv is able to give customers a good return this year as well.”
Fleksion - the product for all new customers and those who joined after 1 July 1999 - was hit harder by market turmoil because of its higher proportion of equities and low use of interest-rate hedging, PenSam said.
Overall, investment strategy had been based on increasing the return by spreading risks across several asset classes, PenSam said.
This meant a higher level of investment in property and infrastructure and also investing in Danish mortgage bonds, it said.
“The long-sighted investment strategy is working, and the priorities we have set have been the right ones,” it said.
The 2012 account dividend for the Tradition product has risen only slightly to 3.54% from 3.53% in 2011, while the Fleksion account dividend rose to 3.84% from 2.35%.