2023 was a good year for investments, and we are delighted to be able to offer all our members a high return.
The negative return in 2022 has been more than offset by the positive performance in 2023, and unlike many comparable funds, our members now have a positive return overall for the past two years.
On this page, you can find a more detailed overview of the results for 2023 and our expectations for 2024.
In 2023, economic performance was far better than expected. As a result, your holiday allowance funds grew by 10.1% in return.
Equities, credit and bonds all contributed to making 2023 a good year for investment, delivering a high return for you as a member. And with a return of 10.1%, the negative return of -7.9% in 2022 was more than made up for. The return is after pension return tax and costs.
The result was driven in particular by investment assets, which yielded a return of 13.1%. The Holiday Allowance Fund comprises an investment portfolio consisting of investment assets and a receivable from employers who have retained holiday allowance within their companies. The receivables from employers yielded a return of 4.7% and accounted for 29% of total assets at the end of the year, compared with 32% at the start of the year.
Financial developments in 2023
Concerns about persistently high inflation and a severe economic downturn gave way to growing optimism as the year progressed. Inflation returned to near-normal levels, the labour market remained exceptionally strong in the US, and the global economy saw solid growth. Geopolitical tensions characterised 2023, with the war in Ukraine continuing and the conflict between Israelis and Palestinians reigniting fiercely, but these tensions had no significant impact on the financial markets.
Interest rate trends were one of the biggest challenges facing the financial markets in 2023. In the third quarter, interest rate rises caused the stock markets to fall quite sharply amid fears that private consumption and corporate earnings would be adversely affected. In the fourth quarter, these fears were replaced by positive expectations that interest rates would not rise any further – perhaps even the opposite – and that consumers and businesses would be able to cope with the current level of interest rates. We therefore saw a very positive trend in the equity markets towards the end of 2023. The trend in interest rates also benefited the bond markets, which have likewise contributed to healthy returns.
Your return depends on developments in the financial markets and may be either positive or negative. However, your holiday allowance funds are invested with the aim of generating the highest possible return, whilst taking into account the risk of loss.
We invest with the overarching aim of safeguarding our members’ interests as effectively as possible. In practice, this is achieved by estimating the long-term return within certain parameters for short-term and long-term risk of loss. We estimate what proportion of members’ assets employers retain within their organisations, and set investment limits for the portion of the assets that is invested.
In relation to the portion of the funds we invest, the asset allocation at the end of 2023 was as follows:
We are committed to addressing the social and climate-related impact of our investments. You can read more about our work on responsible investment here.
With an attributed return of 10.1% in 2023, we made up for the negative return from 2022. And, unlike many comparable funds, members now have a positive return overall for the past two years.
From the time your frozen holiday allowance funds were released until the end of 2023, you have received a total return of 6.1%. This result should be viewed in the context that only a small proportion of the funds could be invested at the start of the period. Currently, approximately 70 per cent of members’ assets are invested, whilst approximately 30 per cent are held by employers.
In 2021, a positive return of 4.6% was recorded; the return in 2022 was -7.9%, and in 2023, as mentioned, we achieved a return of 10.1%.
In 2023, we continued our work on optimising the investment portfolio. The return on investment assets was slightly lower than the benchmark in 2023. This was partly because the proportion of technology shares in our equity portfolio was slightly lower than in the benchmark in 2023, when returns on technology shares were particularly high. The equity strategy aims to generate long-term excess returns, and since its launch in 2021, the current strategy has delivered a higher return than the benchmark.
You can view the current return here.
You can view your personal figures by logging in to the self-service portal on borger.dk here.
Your savings in the Employees' Holiday Allowance Fund have a unique structure, as just under a third of the frozen holiday allowance is held by employers.
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 by 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 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 employer has chosen to retain the holiday allowance within the company or has paid it 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.
We are constantly working to optimise how we invest members’ accrued holiday allowance funds to ensure the best possible long-term return for our members.
In 2023, for example, we have decided to invest up to DKK 2 billion in alternative investments via listed investment companies. Investing in alternative investments via the stock markets is a new development in Denmark. With this investment, we expect to be able to increase precisely that long-term return.
Head of Investments in LD Pensions
It’s reassuring to have a financial buffer in your personal finances. Accrued holiday allowance funds are one such buffer, and the fact that their value increases over time through Return only makes them better.
On the day you reach state pension age, you are free to choose for yourself when to withdraw the funds and for what purpose.
Managing Director of LD Pensions
At home, we’re actually working on increasing our pension savings right now, so that we’ll be able to retire earlier. By the time it’s our turn, the retirement age may well have risen even further.
That’s why we’re making a point of putting extra money aside. And that also played a part in my decision to leave the frozen holiday pay untouched.
Consultant at an IT company
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