As a member of the Holiday Allowance Fund, you were credited with a return of 11.0% in 2024, after pension return tax and fees. Over the past two years, your return has been 22.2%.

LD Pensions’ investments generated a high return of 13.5 per cent. A large proportion of the funds was invested in shares, which yielded a return of 22.2 per cent. Credit investments also delivered good returns, yielding just over 7.3%, whilst a return of 5.1% was achieved on the highest-quality bonds – government and mortgage bonds.

Not all members’ holiday allowance funds have been invested. Around a quarter of members’ assets consist of holiday allowance funds which employers have retained within their organisations. This is a secure investment, and the funds are therefore well protected against loss. In 2024, the funds held by employers yielded a return of 2.2%, compared with 4.7% in 2023. The return on the funds held by employers reflects general wage trends in society. The relatively lower return is due to lower wage increases in 2024 than in 2023. Furthermore, there are minor year-on-year fluctuations, meaning that the return in any given year does not fully correspond to that year’s general wage increase.

In 2024, we continued our work on optimising the investment portfolio for holiday allowance funds, including by expanding the portfolio to include investments in listed alternative assets.

You can view the current return here.

You can view your personal figures by logging in to the self-service portal at borger.dk here.

The year began with concerns as to whether the interest rate rises implemented by the European and US central banks in 2022–23 would lead to an economic downturn, rising unemployment and lower consumption. However, things turned out far better than expected – particularly in the US, where the growth outlook improved significantly over the course of the year. In Europe and China, growth was more subdued, but overall there was solid progress in the global economy.

The equity markets delivered particularly high returns in 2024. A strong labour market and easing of monetary policy underpinned economic growth and, consequently, corporate profitability, and the broad US share index, the S&P 500, rose by over 20% during the year. The dominant theme of the year was the sharp rises in share prices among the seven largest US technology companies, the so-called “Magnificent 7”. At the end of the year, these seven companies accounted for over a third of the S&P 500, which is a historically high level. The rise was driven by a significant increase in the companies’ profitability, but also by market expectations of productivity gains from, amongst other things, artificial intelligence. Danish shares, which make up only a small part of the equity portfolio, performed poorly overall in 2024, with the C25 index ending the year slightly in the red. This was due, amongst other things, to falling share prices for Novo Nordisk and Vestas. 

In 2024, the major central banks began to ease monetary policy following several years of tight financial conditions. At the start of the year, market participants had expected interest rate cuts of around 1.5 percentage points. However, the economy and the labour market proved more resilient than anticipated, and inflation did not ease quite as quickly as expected. Consequently, both the European and US central banks chose to cut their key interest rates from the summer onwards, by a total of 1 percentage point over the course of the year.

The return on safe medium-term bonds was 4–5% in 2024. At the end of the year, interest rates remained at a level that offers the potential for reasonable returns going forward. Robust economic growth and increased risk appetite led to price rises in credit investments, driven by a narrowing of credit spreads. This contributed to a healthy return on credit investments of 7–8 per cent.

2024 was thus a good year for investment across all asset classes, with investors remaining confident of future growth despite a world facing significant challenges in the form of war, trade tensions and high levels of debt in many of the largest economies, including the US.

Employers are permitted to retain a portion of the holiday allowance funds within their organisations. Employers pay an indexation charge in order to retain the holiday allowance funds as liquidity. LD Pensions recognises this indexation as part of the return accruing to members.

Employer-provided holiday allowance funds provide stability for your savings by protecting them against losses and generating returns in line with general wage growth. This also means that the majority of the funds we invest ourselves (the investment assets) consist of higher-risk assets, which over time should generate higher returns than the index-linked funds held by employers. Overall, this should provide members with satisfactory returns whilst maintaining a balanced level of risk.  

It is a financial advantage for members that no pension returns tax is payable on the indexation of the holiday allowance funds held by employers. Had this portion instead consisted of investments in bonds, pension returns tax would have been payable on the returns.

It makes no difference to your return whether your particular employer has chosen to retain the holiday allowance funds within the company or has paid them into the Employees' Holiday Allowance Fund. The returns on both the funds held by employers and the invested holiday allowance funds are distributed in such a way that everyone receives the same percentage allocation to their savings.

The figure below shows the average annual return over the three-year period 2022–2024 for holiday allowance funds and Danish investment funds.

The X-axis shows investment risk as the standard deviation of returns. The graph shows that the holiday allowance funds (clear blue dot) are significantly higher than other funds at the same risk level. In fact, the returns on the holiday allowance funds can match those of funds with much higher risk. 

One of the reasons for this is the performance of the funds in 2022, when many funds suffered losses on both shares and bonds. In 2022, holiday allowance funds were also affected by share losses, but were largely protected against losses on bonds. Only a small proportion was invested in bonds, because the portion of holiday allowance funds held by employers serves, to some extent, as a substitute for bond investments.