Danish labour-market pensions provider AP Pension has said bond losses resulted in a 1.8% investment loss for its traditional with-profits product last year, after a 9.8% profit in 2012.
Returns on unit-link pension plans fell to 10.8% in 2013, down from the 12.5% reported for the year before, the mutually-owned company reported.
However, business grew during the year, with ongoing contributions rising by 8% to DKK4.1bn (€549m), and customer numbers increasing by 3,600.
AP Pension said the with-profits pension product had generally been hit by losses on bond investments.
However, the firm said its 2012 merger with financial sector pension fund FSP was now bearing fruit in terms of reduced costs.
Managing director Søren Dal Thomsen said: “Growth and the focus on reducing costs even further means the official N5 key figure (annual cost per customer) fell to 1,089 kroner from 1,517 kroner in 2012.”
This decline was due to the effects of the merger, he said.
AP Pension said it had introduced a new product, AP Stabil, in the middle of 2013, partly because of the poor return on its traditional with-profits product.
The new plan aims to give customers the kind of stable returns produced by with-profits pensions but without the additional yield guarantee and therefore without the need for interest-rate hedging, Dal Thomsen said.
In an offer to customers put out last year to switch to the new product, AP Pension said around 15,000 customers responded and 7,000 chose to give up their guarantees and move pension savings to AP Stabil.
AP Pension’s total assets under management rose to DKK91bn at the end of December from DKK87bn a year before.