Summary of the 2019 Annual ReportÂ
(News article published on 27 February 2020)
2019 was marked by political uncertainty surrounding trade agreements and Brexit, but the optimism in the financial markets enabled LD Pensions to achieve a solid return on investments of DKK 3.3 billion. This corresponds to DKK 9.7 % before tax.
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In the main portfolio, LD Discretionary, which accounts for more than 90 per cent of the assets, the members achieved a return of 8.5 per cent.
The largest contribution came from a substantial return on equity of 28.2 per cent. Investments are largely made in secure environmental bonds, which generated a return of 2.6 per cent, which is good given the low interest rates. Credit investments, which accounted for the same proportion of the portfolio as listed equities, yielded a return of 8.2 per cent, whilst alternative investments, which represent a minor share, yielded a return of 6.7 per cent. Given LD Discretionary’s cautious risk profile, the return for 2019 is satisfactory.
In terms of risk, LD Discretionary clearly stands out from other Danish pension products, for example due to its overweight allocation to highly rated government and mortgage bonds. Almost 98 per cent of the assets are invested in listed assets, and only a small proportion is invested in illiquid alternative assets. It is very satisfying that LD Discretionary’s listed investments have, over the past many years and almost without exception, achieved a five-star top rating in Morningstar’s comparison of more than 800 European funds. In December 2019, the return on listed investments in LD Discretionary was characterised as above average and the risk as low.
The return on members’ savings, after tax and costs, increased by 7.6% in 2019.
High equity returns on individually invested savings
The option to invest their savings in individual portfolios is taken up by 11.6% of members. These members benefited from high returns ranging from 27% to 32% in the equity portfolios, in which approximately half of their savings were invested. On average, the group increased the value of their savings by 15.7% after tax and costs.
Savings remain with LD Pensions
Members no longer wish to have their savings paid out at the age of 70, as otherwise provided for by law. For every member’s account paid out to a 70-year-old, four member accounts within the same age group remain with LD Pensions. At the end of 2019, members aged 70 and over accounted for 19 per cent of the membership.
In recent years, membership figures have remained stable. One in five members opt to withdraw their savings at the age of 60. The rest leave their savings with LD Pension.
A new influx of money after 40 years
April 2020 marks the 40th anniversary of the establishment of LD Pensions, which was set up with an initial capital of DKK 7.7 billion derived from the frozen cost-of-living allowances. Over the years, DKK 109 billion has been paid out to members and to the tax authorities. At the end of 2019, assets totalled DKK 35 billion, shared amongst 544,000 members.
Almost exactly 40 years after LD Pensions was established, we will receive the first contribution to our new fund – the Holiday Allowance Fund. The first contribution comes from holiday pay held in FerieKonto, which represents a small proportion of the expected capital of approximately DKK 100 billion.
In autumn 2020, the Holiday Allowance Fund will receive the first payments from 150,000 public and private sector employers. It remains unclear how many employers will need to retain the holiday allowance from the transition year to maintain liquidity in their businesses rather than paying an annual indexation, and how many companies will choose to pay into the fund as soon as possible. The level of voluntary payments will influence the investment strategy of the Holiday Allowance Fund.
