Understand the percentages: The calculation of your return

When looking at the PFA Plus percentage return at pfa.dk, you get a general idea of how much your savings are growing. The figure is of course correct, but a number of individual conditions may result in your personal percentage return deviating from the profiles’ overall return in per cent. The explanation is a bit complicated, so hang on tight while one of PFA's actuaries sheds light on figures and percentages and gives you an insight into how your return is calculated.

A saying claims that figures don’t lie. And, in the world of pension, the saying holds true, however, sometimes a single figure does not tell the full story - this also applies to the return in per cent on the market rate plan, PFA Plus.

Needless to say, as a customer with PFA, you get the return you are entitled to according to the investment profile you have selected. When PFA’s actuaries calculate your return, they base the calculation on your specific pension plan. Therefore, your personal percentage return may deviate from the return displayed at PFA’s website, in newsletters, etc.

The two return percentages are calculated in different ways, Jan Krabbe Larsen, Actuary at PFA, explains.
 
“Generally, you cannot compare the percentage return on your own pension savings with the percentage return on the individual investment profiles stated on our website. The percentage return stated at pfa.dk is the return you would have received if you, at the beginning of the period, deposited an amount in your pension savings account and only received the return generated by this amount. Your personal return at My PFA (mitpfa.dk) is calculated based on the time and size of your payments (and payouts) made to and from your specific savings plan,” Jan Krabbe Larsen explains.

This means that your return in per cent at My PFA is calculated based on the money you have paid regularly while the figures at pfa.dk show the return generated since the turn of the year without taking any regular payments into account.

Every penny counts

In PFA Plus, the value of your savings may change four to eight times every day depending on the prices on the financial markets. And when money are being paid to your pension plan, for example every month, the return on the individual payments depends on the current value of the shares and bonds linked to your savings plan*.

“During the course of the year, your employer has typically made a number of payments to your savings plan, and the payments are accepted at the exact price that applies at the time of the payment. This means that the current rate on the day of the payment affects your total return for the year,” Jan Krabbe Larsen says.

although you cannot live on percentages in retirement, your return in per cent is a good indication of how your savings are doing

Sometimes the percentage return is simpler and easier to use for comparison than the return in DKK. And although you cannot live on percentages in retirement, your return in per cent is a good indication of how your savings are doing. When calculating your return in per cent, it must – as it is with percentages – be seen in relation to something. The return in DKK is seen in proportion to the size of the savings, but since other factors than the return influence the size of the savings during the period, it is not obvious how the percentage should be calculated.

“When we calculate your percentage return, which you can see illustrated in a graph at My PFA, we use the average of your savings at the beginning of the period and your savings at the end of the period," Jan Krabbe Larsen explains.

Accuracy and trend

The illustration of your return in per cent, which you find at My PFA (once you have logged in), only shows the trend in your return, whereas the return in DKK is completely accurate. Choosing to see your return in DKK at My PFA also makes it easier to translate your pension savings into the specific wishes and dreams you have for your retirement. 

Facts

• When you log into My PFA (mitpfa.dk), you can view your return in DKK as well as per cent - and both as figures and a graph.
• The prices on the financial markets at the time of your payments determine the size of the return on the individual payments. The return in per cent is a good indicator and tool for comparison, but its shortcoming is that it is not completely accurate because the calculation is based on a factor (your savings) that changes over time. 
• Your personal return will often deviate a little from PFA's general return. This is because the financial markets fluctuate coincident with you making new payments. Then return on all your payments throughout the year determines the rate of return on your personal savings at the end of the year.
• If, during a payment period, you make a larger payment than usual, it may affect your percentage return disproportionately for the period you have selected. This is because the payment affects the savings at the end of the period while the return in DKK depends on whether the payment was made at the beginning or the end of the period.
• You may face a negative return on your savings – even if PFA’s return for the year on your investment profile is positive. This may for instance be the case if the prices increased before your PFA Plus plan was established and then dropped after you began making payments to the plan.