Denmark’s PenSam reported an unexpectedly large loss for 2013 after it paid bonuses to customers switching to non-guaranteed pension plans.

PenSam Liv – the part of the PenSam group that runs its core labour-market pension schemes – made a loss of DKK85m (€11m) in 2013 before tax, down from 2012’s profit of DKK186m.

In its annual report, PenSam said: “The year’s result is not satisfactory but should be seen in the light of the product changeover that was carried out and developments on the financial markets.”

The return on capital in the second half of the year failed to offset the effect on results of the product changeover, it said.

This is why the 2013 result fell short of expectations expressed in an interim report published at the half-year stage, the fund said.

It said last year’s exercise, whereby many customers in the old PMF-Pension switched to the non-guaranteed Fleksion product, delivered a DKK132.2m blow to profits.

PMF-Pension – the labour-market pension fund for childcare assistants, which PenSam took over from Sampension in 2006 – was merged into PenSam in 2012.

Customers with old-style PMF-Pension plans, which included guarantees, were given the option last year to accept a bonus for changing their plans to Fleksion.

PenSam said 38% of the 30,000 customers asked did opt to switch.

PenSam Liv’s overall investment return for 2013 was 3.2%, and the Fleksion pension product generated a 7.7% return, the fund said.

Helen Kobæk, PenSam’s managing director, said PenSam Liv had produced good investment returns in all asset classes.

Equities returned 27%, while private equity and infrastructure generated a return of 8-9%, she said.

Last year’s investment return was the result of the more active investment strategy put in place in 2010, which aimed to balance assets actively and manage risk effectively, PenSam said.

Developments on the financial markets in the wake of the financial crisis had thrown up good investment opportunities, it said.

As part of this, PenSam said it made active investments in construction projects in the Copenhagen harbour, in addition to buying up a mortgage bond portfolio from the state liquidator Finansiel Stabilitet. 

Contibutions for the year were broadly unchanged from the year before at DKK5bn.

Assets under management rose to DKK84.5bn at the end of 2013 from DKK77.6bn a year before.

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