Danish pensions and insurance lobby group Insurance and Pensions Denmark (IPD) has taken issue with the way ATP backed up its assertion yesterday that in Denmark, pension “free riders” ended up with more disposal income over a lifetime.

The industry group said in a statement that the pension fund “had a point” with its calculation examples of how pension offsetting worked in practice, but it said failing to save up for a pension at all was not an advantage.

IPD gave several reasons why the DKK918bn (€123bn) statutory pension fund’s calculations were not representative, saying that among other things, its main example assumed a very low-risk investment profile for the model pension saver.

Jan Hansen, IPD’s deputy director said: “ATP has chosen a very conservative investment strategy: 3/4 bonds and 1/4 shares throughout the savings and disbursement process.”

A typical medium-risk profile from a Danish pension firm for a young saver began with 3/4 shares, he said, a proportion which was then gradually reduced to 1/3 by retirement, adding that this was significant since equities were expected to produce higher returns than bonds.

Hansen said ATP had also picked a person who had been in the labour market for 50 years as its example, whereas the government’s recent unveiling of its early retirement proposal had shown that only around 40-50,000 people had worked for over 41 years.

“Very few are in the labour market for 50 years. And virtually none of them have saved so little up for retirement that they qualify for a full seniors’ cheque [a lump sum for Danes who have little or no income in addition to the state pension],” he said.

Given a more realistic investment profile with an increased equity weighting, IPD said ATP’s “negative picture” would be transformed into a small profit of just over DKK80,000.

It also said the two people in ATP’s examples would end up with markedly different outcomes in terms of pension coverage, with the “free-rider” receiving around 60% of salary coverage, and the pension saver receiving nearly 100% of their salary.

Like ATP, IPD also concluded its statement with suggestions about the remit of the newly-established Pension Commission.

Hansen argued that the commission needed to examine whether the incentive to save up for retirement was good enough – both over the entire savings process and in the years before the state pension age.

“A few years ago, politicians took big steps in the right direction by introducing old-age savings [aldersopsparing] and extra pension deductions. But we are not quite there,” he said.

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