Average interest rate in brief
With average interest rate savings, the money is invested at a relatively low risk as we need to ensure the guaranteed minimum payout. The majority of your savings are invested in bonds, and only a small part is invested in shares. However, the share ratio may vary depending on which interest rate group you have been placed in.
Addition of interest
With an average interest rate plan, you receive the interest rate that PFA fixes on an ongoing basis (the deposit interest rate), which is based on the average historical and expected returns seen over a number of years. In this way, the annual fluctuations in the actual return are evened out, and PFA’s investment return will therefore not directly influence the interest added to your savings. The deposit interest rate is reported to the Danish Financial Supervisory Authority, and it is fixed once a year as a minimum. Regardless of the deposit interest rate, you will always, as a minimum, receive the guaranteed minimum payout (guaranteed benefits) for your plan.
No influence on investments
PFA fixes the deposit interest rate, and you do not have any influence on the investment selection. For instance, this means that you cannot adjust the investments to match your age and risk appetite.
Most average interest rate plans include the possibility of an added bonus that may increase the agreed minimum payouts. It will be stated in your policy if this possibility applies to your plan. Special rules apply to your pension plan if your policy does not mention the possibility of bonus. You can read more in your terms and conditions of pension at My PFA.
Interest rate groups
Your average interest savings are placed in one out of four interest rate groups. Your interest rate group depends on your minimum payout (guaranteed benefits).