2019 was marked by political uncertainty surrounding trade agreements and Brexit, but optimism in the financial markets enabled LD Pensions to achieve a solid return on investment of DKK 3.3 billion, equivalent to 9.7 per cent before the Danish Tax Agency.
Read the full LD Pensions' annual report for 2019.
LD Pensions' annual report 2019 – PDFIn the main fund, LD Discretionary, which holds over 90% of the fund’s assets, members received a return of 8.5%. The largest contribution came from a very high equity return of 28.2%. There is significant investment in secure, high-rated bonds, which yielded a return of 2.6 per cent – a good result given the very low interest rate environment. Credit investments, which are weighted equally to listed equities, yielded 8.2 per cent, whilst alternative investments, which account for only a small proportion, yielded 6.7 per cent. Given LD Discretionary’s cautious risk profile, these strong returns for 2019 are satisfactory.
In terms of risk, LD Discretionary clearly stands out from other Danish pension products, partly due to an overweight allocation to high-rated government and mortgage bonds. Almost 98 per cent of the fund’s assets are invested in listed equities, and investments in illiquid alternative assets are very limited. It is very satisfying that, over the past many years, LD Discretionary’s listed investments have, almost without exception, achieved a top five-star rating in Morningstar’s comparison of over 800 European funds. In December 2019, the return on listed investments in LD Discretionary was characterised as above average and the risk as low.
After pension return tax and costs, members saw their savings increase by 7.6% in 2019.
High returns on shares for those who opt for collective investment schemes
The option to allocate savings individually to portfolios is utilised by 11.6% of members. They benefited from high returns of between 27% and 32% in the equity portfolios, in which around half of the savings of those who opted for these portfolios were invested. On average, this group saw the value of their savings increase by 15.7% net of pension returns tax and fees.
Older people continue to save
Members no longer wish to have their savings paid out at the age of 70, as otherwise required by law. For every one person aged 70 who receives payouts, four people aged 70 opt out of the payouts and allow their savings to continue. At the end of 2019, members aged 70 and over accounted for 19 per cent of the membership.
Membership trends have been very stable in recent years. Just under one in five members have their money paid out at the age of 60. The rest continue to save.
New money after 40 years
April 2020 marks 40 years since Dyrtidsfonden was established with an initial capital of DKK 7.7 billion in frozen cost-of-living adjustments. Over the years, a total of DKK 109 billion has been paid out to members and in tax payments. At the end of 2019, the fund’s assets stood at DKK 35 billion, distributed amongst 544,000 members.
Almost exactly 40 years after the establishment of Dyrtidsfonden, we are receiving the first injection of funds into our new fund, The Holiday Allowance Fund. These are holiday allowance funds from FerieKonto, which represent a small proportion of the total expected assets of approximately DKK 100 billion.
In autumn 2020, we at the Holiday Allowance Fund will receive the first payments from around 150,000 public and private sector employers. It is as yet unclear how many employers will need to retain the holiday allowance funds from the transitional year as liquidity within their organisations in return for annual indexation, and how many will choose to make payments as soon as possible. The volume of voluntary payments will influence the investment strategy of the Holiday Allowance Fund.
