DENMARK - Pension funds FSP and Lægernes are the latest in Denmark to create new defined contribution schemes to allow more members to take on more risk themselves rather than sticking to the safety of the traditional guaranteed return schemes.

Recent research from industry body Forsikring & Pension (F&P) has revealed that despite the financial crisis, an increasing number of Danes are opting for unit-link pensions which expose them to market risk directly.

According to F&P, 960,000 Danes had a unit-link pension plan in 2008, three times as many as had invested in this type of plan in 2000. However, F&P also pointed out that the traditional pension plans, which give an averaged-out level of return, remained by far the most widespread.

"This development shows that many pension customers want an alternative to the traditional pension plans with a guaranteed yield when they retire," said F&P deputy director Carsten Andersen.

More pension providers are now offering this type of plan, the association said, with 19 now running these schemes compared with seven in 2000.

Financial sector pension fund FSP yesterday announced the launch of new product FSP Pensionsvalg 2009, which will allow most of its customers the chance to choose the new unit-link plan - FSP Markedrente.

The new product was approved earlier this year at the fund's AGM, as part of a comprehensive modernisation and simplification of pension schemes to facilitate economies of scale and give more transparency to customers, FSP said.

Lægernes Pensionskasse, the Danish pension fund for doctors, has also announced a new pension plan to which members can switch instead of the traditional guaranteed pension scheme.

Whereas the traditional scheme invests a large portion of its assets in bonds and includes various forms of risk provisioning, the new plan will be able to invest a larger proportion of assets in shares, real estate and index-linked bonds.

"If doctors choose to switch from the so-called guaranteed plan to the new plan with conditional guarantee, it would mean that to begin with the pensions are reduced. However, in the longer term the new plan is expected to provide members with a higher pension," said Lægernes.

Topics