Denmark’s LD Pensions said it now estimates that around DKK20bn (€2.7bn) of the frozen holiday allowances it was tasked with managing will remain in its fund, following the next round of early outflows.
The pensions manager, which was commissioned four years ago to set up and run the holiday allowances fund, Lønmodtagernes Feriemidler, said today that in all, employers had now reported DKK108bn of holiday pay – money that was all originally to be included in the fund.
Last summer, as a COVID-19 crisis measure, the Danish government decided to grant Danes early access to three weeks’ worth of their five-week frozen holiday allowance for the year to the end of August 2020 – resources that were to constitute the holiday allowances fund.
Then last Wednesday, a bill allowing the remaining two weeks of allowances to be paid out was circulated for consultation by the Ministry for Employment, following a cross-party decision in December.
LD Pensions said that just over DKK52bn had already been paid out to individuals, and an additional DKK56.8bn would potentially be paid out this spring.
In its statement today, the Frederiksberg-based firm said: “Employees must request payment themselves, but if some of the employees leave the money, and it happens to the same extent as in the autumn, approximately DKK36bn will be paid out early during the spring of 2021.
“This will leave approximately DKK20bn in Lønmodtagernes Feriemidler, which will be invested together with Lønmodtagernes Dyrtidsmidler in order to give the employees who are continuing a good return until they [the assets] are paid out,” the firm said.
Lønmodtagernes Dyrtidsmidler is the non-contributory maturing pension fund LD Pensions was originally established to manage in 1980.
The frozen holiday allowances which workers decide not to access early will be kept in the fund until individuals’ state pension age – as was the original plan for all of the assets.
The allowances are held in the either in the form of loans to the employers or, where firms decide to pay the allowances to the fund directly, invested in a diversified portfolio of assets by LD Pensions.
Peter Hummelgaard, Minister for Employment and Gender Equality, said it had been good for the Danish economy “at this extraordinary time” that there had been the opportunity for employees to get their frozen holiday pay ahead of time.
“We want as many people as possible to withdraw holiday pay, when – before long – they are able to have the last two weeks paid out.
“The money must help boost the economy, and the hope is that it will be spent on Danish goods here, where you live, so it can be felt, not least in the shops and restaurants that have been hard hit by the lockdowns,” he said.
The extra year’s worth of holiday allowances came about in Denmark as a result of the country bringing its employment law into line with the EU.
Rather than forcing employers to pay out double the usual amount in holiday allowances for a year, the government opted to freeze the rights as financial assets for individuals until retirement.