Summary of the annual report 2020
(News article published 05.03.2021)
Despite record-breaking disbursements, the assets for the holiday allowance and cost-of-living allowance amounted to DKK 89.3 billion at the end of 2020. This means that in the same year as LD Pensions can celebrate its 40 anniversary, the assets are record high.
LD Pensions manages both the Cost-of-Living Allowance Fund (Lønmodtagernes Dyrtidsmidler) and the Holiday Allowance Fund (Lønmodtagernes Feriemidler), and as shown in the annual report for 2020, it is especially the holiday allowance, which have contributed to the record high disbursement of DKK 56.4 billion.
In autumn 2020, early disbursement of three weeks holiday allowance took place. An amount of DKK 52.1 billion was disbursed to the employees. It became an important stimulus to consumption, where parts of the business community had been negatively affected by corona restrictions for a long time. An amount of DKK 57.3 billion is left in the Holiday Allowance Fund. This is amount stated by the employers after deduction of the total disbursements in 2020.
Disbursements for the cost-of-living allowance were also high. The first lockdown of Denmark, in spring 2020, caused significant disturbance in the financial markets, which resulted in an increase in disbursements of cost-of-living allowance a lot higher than the usual disbursement level. DKK 4.1 billion cost-of-living allowance was disbursed (an increase of 8.5 % since 2019), of which advance tax to the state (because of the tax rebate), amounted to DKK 1.4 billion.
The Holiday Allowance Fund increased its value by DKK 0.5 billion
The frozen holiday allowance is placed both in the Holiday Allowance Fund and with the employers. Approximately 10 % of the frozen holiday allowance, equalling DKK 10.7 billion was placed in the fund at the end of the year, and is invested by LD Pensions. The return on investment in 2020 was 3.8 %, measured as time-weighted return.
At the end of the year, 90 % of the holiday funds were still placed with the employers, who from 1 September 2020 and onwards must yield return interest on these assets with an indexation corresponding to the wage development. LD Pensions has estimated the interest on these assets to 1.3 % corresponding to 0.4 % since 1 September 2020.
The return on investment and the interest payment (indexation) of funds remaining with the employers gave a total result of DKK 693 million in 2020, of which the fund must settle 123 million DKK to the state as interest on the government funding of early disbursements in 2020. This gives the members a result of DKK 497 million after PAL (pension return tax) tax and costs. The result must be seen in the light of the fact that only a small part of the holiday allowance was invested in 2020. Furthermore, the assets were only invested for part of the year, and interest payment (indexation) on the assets remaining with the employers only was in force for 4 months, namely from 1 September to 31 December 2020.
LD Pensions has thus increased the holiday allowance by DKK 0.5 billion due to its result in 2020. For the individual employee, this results in a positive adjustment of their assets by of 0.9 % as per 31 December 2020. The adjustment of 0.9 % is after PAL tax and costs.
The Cost-of-Living Allowance Fund also strengthened in 2020
The total investment return for the Cost-of-Living Allowance Fund is distributed with DKK 769 million in LD Discretionary, which is LD Pensions’ largest investment portfolio and which comprises 88 % of the members' assets, and DKK 534 million in the other portfolios in the Cost-of-Living Allowance Fund. The total equity return amounted to 12.5 %, while bond investments yielded 0.9 %. In LD Discretionary, the total investment return amounted to 3.2 %. The portfolio, Danish Equities delivered an extremely high return of 36.1 %. The lowest return was obtained for LD Short Term Bonds, which ended at -0.2 %.
In LD Discretionary, the investments in high-grade bonds and equities respectively increased the result with 1.2 % and 6.0 %. Credit investments decreased the result with -0.2 %.
Low cost figures in LD Pensions
The costs for administration make up 0.13 % of the assets for the cost-of-living allowance and only 0.03 % of the total assets for the holiday allowance. The extremely low costs for the holiday allowance are partly because the employers cover part of the current administration costs. The cost for the costs-of-living allowance have increased due to increased costs to a new supplier providing administration of pension service and member service. However, this has not burdened the members, who unchanged has paid 0.08 % of the assets in running administrative contributions.
- The total assets in LD Pensions at the end of 2020 amounted to a total of DKK 89.4 billion. The cost-of-living allowance amounted to DKK 32.1 billion, and the holiday allowance amounted to DKK 57.3 billion.
- The consolidated investment return for LD Pensions amounted to approx. DKK 1.9 billion, divided between the Cost-of-Living Allowance Fund with just over DKK 1.3 billion and almost DKK 0.6 billion for the Holiday Allowance Fund.