Danish funds suffered more than many from the market meltdown. Much of Denmark’s pension money is based on a 4.5% minimum benefit guarantee, which was the rate for 12 years until 1994.
The falls in share prices and interest rates, combined with the high guarantee, have made it difficult for schemes to meet their statutory capital requirements.
The Danish Insurance Association has been discussing with the government new ways of calculating the guarantee rates to make them more adjustable and able to tackle economic changes. The rates may need to go altogether. The government has been pushing for employees to be given more say over investments.
“But if you can choose investments you can’t have a guaranteed return on those investments,” says Anne Seiersen, the association’s head of department. The government recently set up a commission to look into increasing employees’ choice of scheme, benefit mix and investments and making moving between schemes easier.
There is even talk of employees being able to have their pension in a different sector from the one they work in.
To the association’s relief the commission’s report is “quite soft”, recommending that the social partners and pension companies discuss how to take its proposals forward rather than proposing legislation.
The association will give its response in the autumn. “We were a little worried. But as the social partners are quite strong here, it would be difficult for the government to overrule their decisions.”
Denmark’s occupational sector is not highly regulated. There are rules on solvency and fund supervision, but the social partners control benefits and contributions.
“We want to keep the decisions left up to the partners who’ve made a system where over 90% are covered and have a broad spread in Danish society,” says Seiersen.
But despite the report’s “soft” approach, the association is worried about its proposal for a limit on how much funds can charge for leaving schemes and a recommendation that people should be allowed to take a portion of the collective buffer resources with them.
“The more you individualise, the less flexibility there is for the company,” says Seiersen. Overall, funds don’t mind taking steps to increase employee choice because “that’s the way institutions have been going themselves”.
But blanket laws must be avoided. “The financial sector fund is very interested in this, but nurses don’t care. You shouldn’t force the nurses to do this because it’s an expensive business.”
The association is disdainful about the commission’s suggestion that workers in one industry should be able to choose a pension in another. This would require each sector to be able to cater to the requirements of employees from all the other sectors.
“They’re saying that if a teacher moves to a bricklayer’s system they should still expect to be treated as a teacher. The scheme should be able to run the properties, such as assumptions about life expectancy and disability, of all the other funds. It would be absolute chaos.”
But although people may never be able to choose another sector, they can look forward to “more options of benefit mix, and investment”, she says.

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