Summary of the annual report 2019
(News article published 27.02.2020)
2019 was characterised by political uncertainty about trade agreements and Brexit, but the optimism in the financial markets gave LD Pensions a solid return on investments of DKK 3.3 billion. This corresponds to DKK 9.7 % before tax.
In the main portfolio, LD Discretionary, which accounts for more than 90 % of the assets, the members obtained a return of 8.5 %.
The largest contribution came from a substantial return on equity of 28.2 %. To a large extent, investments are made in secure environment bonds, which generated a return of 2.6 %, which is good in light of the low interest rate. Credit investments, which weighted just as much as the listed equity, provided a return of 8.2 %, while alternative investments, which accounts for a minor share, provided a return of 6.7 %. In light of a cautious risk profile for LD Discretionary, the return for 2019 is satisfactory.
With regard to risk, LD Discretionary clearly stands out from other Danish pension products, e.g. due to an overweight of investments in highly rated government and mortgage bonds. Almost 98 % of the assets are invested in listed assets, and only a small share is invested in illiquid alternative assets. It is very satisfying that LD Discretionary’s listed investments, the past many years and almost without exception, have 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 is characterised as above average and the risk as low.
The return on member savings after tax and costs was increased by 7.6 % in 2019.
High equity returns for individually placed savings
The possibility of individually placing the savings in portfolios, is used by 11.6% of the members. These members benefited from high returns ranging from 27% to 32% in the equity portfolios, where approximately half of their savings was placed. On average, the group increased the value of their savings by 15.7% after tax and costs.
Savings remain in LD Pensions
The members no longer want their savings paid out at the age 70, as otherwise provided by law. For each member account paid out to a 70-year-old, four member accounts within the same age group remain in LD Pensions. At the end of 2019, members aged 70+ made up 19 % of the members.
In recent years, the member development has been stable. One in five members choose disbursement of their account at the age of 60. The rest leave their savings in LD Pension.
New influx of money after 40 years
In April 2020, it is 40 years ago since LD Pensions was established with a start capital of DKK 7.7 billion deriving from the frozen cost-of-living allowances. Over the years, disbursement of DKK 109 billion has taken place to the members and to the tax authorities. At the end of 2019 the assets amounted to DKK 35 billion shared among 544,000 members.
Almost exactly 40 years after the establishment of LD Pensions we will receive the first contribution to our new fund – the Holiday Allowance Fund. The first contribution derives from holiday allowance from FerieKonto, which constitutes a small portion of the expected capital of approx. DKK 100 billion.
In autumn 2020, the Holiday Allowance Fund will receive the first payments from 150,000 public and private employers. It is still uncertain how many employers will need to keep the holiday allowance from the transition year as liquidity in their business against paying an annual indexing, and how many companies choose to pay into the fund as soon as possible. The extent of voluntary payments will have an impact on the investment strategy in the Holiday Allowance Fund.