IPE Nordic Briefing: Bold ideas on Danish pensions policy

Bold ideas on pensions policy emerged in Denmark this summer. Prime minister Mette Frederiksen’s Social Democrats vowed to end the automatic increases in state pension age which are a key feature of the landmark 2006 welfare agreement in Denmark.

Governing coalition party Venstre then set out its own ideas on what needs to change around the pension system, and proposed setting up a ‘working life commission’ to investigate.

Well-intentioned proposals made at party conferences are one thing, and the reality of working within a three-party coalition another. It is already clear the parties disagree on the future state pension age issue.

Interim results from Denmark’s statutory pension scheme ATP showed it continuing to recoup some of 2022’s huge losses on its investment portfolio, but at a slow rate. The DKK693.3bn (€92.9bn) pension fund reported a return of just 3% on the portfolio in the first half  – with the rising cost of leverage having eaten into equity returns.

In mid-August, the pensions organisation had presented a new defence of the risk-parity investment strategy it uses to target returns on the scheme’s free assets or bonus potential. This time it did so by comparing four different investment models alongside its own, and concluding that only its current approach meets the requirements of its own product.

Across the Øresund, Sweden’s largest pensions institution – the occupational pensions giant Alecta – reported a 7.7% return for January to June. Chief executive officer Peder Hasslev said the pension fund had spent the period working intensively on developing and implementing improvement measures to strengthen the pension provider.

Still under a cloud due to high-profile bad investments, Alecta remains mired in uncertainty as the Swedish Financial Supervisory Authority decides whether to escalate an investigation around rule breaking – and prosecutors probe a corruption case around its investment in residential real estate firm Heimstaden Bostad.

After results came in for Sweden’s big four pensions buffer fund last month, Stockholm-based AP3 was shown to have made the highest return for the first half of this year, even though it suffered a SEK1.9bn loss on an investment in the struggling UK utility Thames Water.

Items to note:

• Norges Bank Investment Management reported an 8.6% first-half return on the Government Pension Fund Global, saying that the result had been mainly driven by the technology stocks, due to increased demand for new solutions in artificial intelligence.
• Reykjavik’s Harpa Concert Hall and Conference Centre will be the venue for the latest IPE Iceland event for senior Icelandic pension fund investors on 3 October.

Rachel Fixsen

Nordic Correspondent