Since the beginning of 2015, Danish citizens have collectively contributed 1.148 billion DKK to domestic insurance and pension companies, fueling the growth of their pension savings. This amount surpasses the total pensions disbursed during the same period, leading to a positive net contribution to pension funds. The trend in contributions has been consistently upward, with the year 2023 seeing a preliminary total of 78 billion DKK deposited—2 billion DKK more than the same period the previous year.
It’s notable that while contributions have remained relatively stable over the entire period, the performance of pension investments (afkast) has fluctuated in response to the dynamics of financial markets.
Key Points:
- Danish pension contributions have consistently increased since 2015, culminating in a record-high 78 billion DKK during the first half of 2023. This growth is attributed to increased employment and higher wages.
- In contrast to contributions, pension investment returns have exhibited greater variability due to market fluctuations. Since 2015, pension afkast amounted to 673 billion DKK. The returns reached a peak of 1.181 billion DKK before declining by 609 billion DKK in 2022 due to financial challenges. In the first half of 2023, however, afkast rebounded with an increase of 102 billion DKK.
Accumulating Pension Wealth:
- Danish insurance and pension companies have seen a growth of 936 billion DKK in pension wealth since the first quarter of 2015, bringing the total to 3.874 trillion DKK. This rise can be attributed to positive investment returns and a higher volume of contributions compared to disbursements over the entire period.
- The proportion of pension wealth allocated to market-rate products has risen to 45%, up from a quarter in the first quarter of 2015. This shift is partly due to insurance and pension companies increasingly offering market-rate savings options. Market-rate savings have also experienced higher returns, more contributions, and fewer disbursements compared to average-rate savings.
The current trend toward market-rate pension savings reflects a closer alignment between pension returns and underlying investments, placing greater risk on savers. This trend has been replacing traditional average-rate savings, where returns depend on a set deposit rate determined by individual insurance and pension companies.
In Summary: Danish pension savings have witnessed consistent growth in contributions, underpinning the overall stability of pension funds. The rise in pension wealth is driven by both sustained contributions and variable investment returns that respond to market movements. Market-rate savings have been particularly instrumental in shaping the evolution of pension wealth in Denmark.