How we make your          money grow

What happens to my pension savings in the hands of Danica Pension's investment team when I save up with Danica Balance? Am I guaranteed a certain return when I retire? And how much money can I expect Danica Pension to generate for me? Get answers to this and many other questions here.

Danica Pension talks about ‘robust’ investment of my savings in Danica Balance – what does this mean?

We define robustness as investing your savings broadly, so that you should not incur huge losses, even if we experience major declines in the financial markets. Our strategy is to look ahead and optimise your expectations of a stable return over time, which should enable you to benefit from your pension savings when you retire.

Can you get high returns without taking risks?

Naturally, it would be great if it was possible to get high returns without risk of major losses. But the two go hand in hand. If you take the risk required to get a very large return, you also accept a higher risk of major losses. As a Danica Pension customer, you can take higher risk if you want to. If you choose a very high risk profile, however, we cannot offer you the same level of robustness as we cannot diversify your investments to the same extent.

How can you generate high returns at a lower risk?

– We can do so, because we have strong purchasing power due to our size. Just like you often get a discount when you buy in bulk in the supermarket. We can make very large bulk purchases as we have about DKK 350 billion at our disposal. As a result, we make a lot of transactions at a lower price than others can, and our customers benefit from these discounts in the form of higher returns. We are also often the first to be offered to invest in large projects, such as properties or motorways. And these are often really good investments.

Bonds: The lowest possible risk

When you buy a bond, you are not actually buying anything. It is an instrument of debt documenting your lending of money to for example a company, a mortgage credit institution or a government. The recipient of your money typically pays you an annual rate of interest on your loan and usually also commits to repaying the entire amount, typically when the bond (instrument of debt) matures.

Equities: The highest possible return

An equity (or share) is actually a share of a company. It does not generate a fixed yield or an annual rate of interest as is typically the case with bonds. However, you can get returns on your investments in equities by buying and selling them at the right price. As long as you own the share, you will receive dividends on the company’s value and earnings. You will do so, as long as you keep the share – and the company is in operation.

How exactly do you ensure that you do not invest my pension savings at higher risk than my chosen risk profile?

We do so by monitoring the market and constantly moving the investments between low-risk assets (such as bonds) and high-risk assets (such as equities). We also take the necessary precautions by fixing the exchange rate when we invest in assets in foreign currency, so that we are protected against major exchange rate fluctuations. Or we simply choose to add on insurance against rising inflation, for example.

How we invest your savings

When you have a Danica Balance scheme (like the majority of our customers), your savings are currently invested in three different internal investment pools, each with different levels of risk. When you set up your pension scheme, you choose your risk profile, which affects the proportion of your savings allocated to each of the three funds.

  • High-risk investments are those subject to the greatest risk. We invest primarily in global equities, where the return fluctuates in line with financial market developments. Over time, this group of assets has historically generated higher returns compared to other asset classes.

    Low-risk investments have historically been more price stable. We primarily invest in bonds, as the value of bonds will not significantly fluctuate. We also supplement with other types of investment such as properties. This portfolio is more stable, and therefore naturally does not generate the highest returns.

    In this pool, we invest in equities, bonds, properties and what we call alternative investments, such as bridges or motorways. On average, the expected return is in between the return generated by the low-risk investment fund and the return generated by the high-risk investment fund.

How big a return can I expect to have when I retire?

It very much depends on market developments, the number of years to your retirement and your chosen risk profile. For example, if you have chosen our lowest risk profile and you have 10-15 years to your retirement, based on our forecast we expect you to have an annual return of about 3%, assuming the same economic growth as in 2018. With the highest risk profile, we expect you to have an annual return of 5-6% over the next 10-15 years. If you have chosen a medium risk profile, just like the majority of our customers, we expect an annual return of 4% over the same period of time. If you have 30 years to your retirement, the expected annual return is 5-8% over the next 10-15 years. However, these rates may turn out to be higher or lower, depending on the developments in the economy and the financial markets.

A lot can happen in a year. Does your pension scheme fit your current life situation?