LD to manage new 80-85 Billion DKK Holiday Fund

In a recently published report, the Holiday Law Committee has designated LD as the manager of the transitional arrangement between the old and the new holiday laws. It will place the responsibility for 80 - 85 billion DKK at LD, which has managed the Salary Benefit Fund (frozen cost-of-living allowances) for many years.

Denmark needed to change its holiday rules after an EU Commission decision that the Danish holiday rules on delayed holiday rights were against EU law. Therefore, the Holiday Law Committee was established in 2015 to come up with a new law, which should solve this problem.

Upon the switch to a new holiday act in September 2020, a full-year earned holiday (equal to 5 weeks) will be frozen for employees, who have been employed throughout the previous holiday period. The Holiday Law Committee recommends that LD will be responsible for the frozen holiday funds until retirement from the labour market.

Why freeze the holiday funds?
The need to freeze the holiday funds arise when a new holiday act enters into force, which is expected to take place on 1 September 2020. The new holiday law is based on the principle of simultaneity earning and holding holidays. Even after one month's employment, the employee will be entitled, but not obliged to hold 2.08 days of holidays. When the new law enters into force, employees have saved holidays from the current holiday law. Therefore, the Holiday Law Committee does not find it appropriate that the employees in the transition year between old and new holiday laws should be entitled to double holiday rights. Therefore, the excess holiday funds are frozen in a fund.

Consideration for employers
The Holidays Committee has proposed that employers may owe the fund the outstanding holiday funds under the Old Holiday Act until the fund is to pay the funds to the employees. This prevents employers from having to raise liquidity to pay off their holiday funds according to the Old Holiday Act, while employees continuously earn new holidays. 

Two legs of the asset management
The capital management of the Holiday Fund will take place in the same set-up as the management of the funds in the Salary Benefit Fund. However, the fund management of the Holiday Fund will be based on two legs - partly loans from employers and partly frozen holiday funds transferred to LD.

The Holiday Law Committee estimates that about 25 billion DKK will be transferred to LD for investment, while the remainder will remain with the employers for a shorter or longer period. However, this estimate is associated with considerable uncertainty, and it is expected that the amount of loans to employers will vary over time. 

A good match
LD's investment structure in the investment area is flexible, and the assets of the Holiday Fund can be easily integrated into LD's existing fund structure. The joint investment with Salary Benefit Fund and the Holiday Fund will ensure low costs and access to qualified investment advisors from day one in all key areas.