Denmark’s largest commercial pension fund PFA took a hit to its bonus pool because of rising life expectancy.

PFA boosted its business in the first nine months of the year, according to its third-quarter resuts, but its bonus potential was dented by DKK2.2bn (€296m) of provisions set aside to account for increased life expectancy of its members.

The pension fund said its investments produced between 4.3% and 9% in profits for market-rate customers between January and September, and 1.8% for customers on average-rate pensions.

Allan Polack, PFA’s chief executive, said: “People in Denmark live longer, which is positive, but when longevity in Denmark increases markedly, we must take due account of this in our financial statements.”

Since 30 September, PFA’s life insurance provisions have been based on a 20-year longevity benchmark instead of the previous 30-year benchmark, it said.

This change reduced the collective bonus potential by DKK2.2bn, with this increase also affecting results for the first three quarters of 2017.

In the first nine months of the year, PFA’s regular pension contributions were up 12% year-on-year. In the same period, it won 189 new corporate customers and lost 59.

“We are seeing considerable growth in regular payments and we are attracting many new corporate customers, which is impressive in a mature market,” Polack said.

PFA’s customer assets rose to DKK463bn at the end of September, from DKK440bn.

Alternatives boost Danica in 2017

Meanwhile, Danica Pension said alternative investments produced particularly strong returns for its customers in the year to September, with the asset class generating 9.6% overall in the period.

Per Klitgård, chief executive of the Danske Bank pensions subsidiary, said: “With our alternative investments, we are spreading our investments and producing attractive returns.”

In the first three quarters of the year, Danica Pension had put around DKK6bn directly into “sound companies”, he said.

“In the coming years, our ambition is to invest DKK15bn annually, provided we can find suitable investment prospects,” Klitgård added.

The firm began its direct investment strategy in 2014.

Danica Pension increased its return for unit-linked pensions to 6.3% in the first nine months of this year, from 1.3% for the same period in 2016, according to its interim financial report.

However, the return on traditional with-profits pensions fell to 1.3%, from from 8.9%.

Folksam hits out at savings tax

Swedish pensions and insurance group Folksam has criticised the government’s plan to increase tax on insurance-based savings products.

In the group’s interim report, chief executive Jens Henriksson highlighted the government’s proposal for the increased tax, which is set to take effect on 1 January next year.

“For us in the Folksam Group, the starting point is always our customers,” he said. “Even though the cost of the increased tax is modest, the focus should be on creating opportunities for higher pensions instead, because they are already under pressure.”

Folksam’s life insurance and pensions division Folksam Liv made a 3.4% total return in the nine months to the end of September.

KPA Pension, which covers local government staff in Sweden and is 60% owned by Folksam, made a 3.7% return in the period.