How PFA CustomerCapital works
When PFA Pension was founded in 1917, the owners decided that they were only to receive a very limited part of the profit. This remains the case today, which means that we are able to pass on most of the profit we generate to our customers. Among other things, this is done by means of interest on CustomerCapital, which we have just distributed for 2018. This means that a large number of our customers have received extra money for their retirement.
CustomerCapital is capital base in PFA Pension and will receive a part of any profit, but will also take part in covering any losses. It gives you, as a customer, the possibility of obtaining an extra high interest on the part of your savings that is paid to CustomerCapital. However, CustomerCapital is also associated with risk, which means that CustomerCapital may be reduced (due to negative interest) or, in the last resort, be completely exhausted.
How CustomerCapital works
PFA Pension’s objective is to create as much value for the customers as possible. This is, among other things, ensured through our model for distribution of profit and risk, which we call CustomerCapital. The main part of PFA Pension’s customers with pension savings currently has CustomerCapital. In 2019, the interest on CustomerCapital is expected to be 10 % before pension yield tax. In future, the interest on CustomerCapital may change, and it may also be negative. PFA Pension fixes part of the interest and is therefore also entitled to make changes to it.
CustomerCapital consists of Individual CustomerCapital and Collective CustomerCapital.
Below, you can read more about how the model works overall. The detailed rules in force at any time appear from the regulations listed at the bottom of the page and from PFA Pension’s technical basis, which have been reported to the Danish Financial Supervisory Authority.
Payments to Individual CustomerCapital
If you have CustomerCapital, an amount corresponding to 5 % of your payments and single payments to your savings plan will be transferred to Individual CustomerCapital. However, for old-age savings, this only applies to single payments and payments from 1 July 2019. Individual CustomerCapital is not accumulated on transfer of pension savings from another pension plan with PFA Pension or another pension supplier.
With Individual CustomerCapital, you will receive a part of the interest which, in other pension companies, would be allocated to the owners. Individual CustomerCapital forms part of the capital base in PFA Pension, which makes up PFA Pension’s financial strength. Technically, Individual CustomerCapital is a so-called bonus provision, type B.
How interest is added to Individual CustomerCapital
With Individual CustomerCapital, you, as a rule, get at least the same return every year as the interest PFA generates on the shareholders’ equity before tax. If you had CustomerCapital in 2018, the interest was 10 % before pension yield tax.
For 2019, the expected annual interest on Individual CustomerCapital is 10 % before pension yield tax. PFA Pension has decided that - at present, only for 2019 – the entire annual interest will be distributed to the pension savings through a single addition of interest in April 2020 (provided that you still have your pension plan with PFA Pension at that time).
A positive interest on Individual CustomerCapital will be deposited into you ordinary savings plan. Any negative interest will be deducted from Individual CustomerCapital. Negative interest may occur if PFA Pension sustains a loss and Collective CustomerCapital has been exhausted and therefore cannot cover Individual CustomerCapital’s share of the loss. This is explained further in the menu "What about the risk”.
|Interest on individual CustomerCapital, per cent before pension yield tax
Collective CustomerCapital contributes to your return
Collective CustomerCapital is a special bonus provision (reserve) which PFA Pension’s owners created from the shareholders’ equity in PFA Pension.
The PFA Foundation and the organisations that own PFA established this reserve for the benefit of PFA Pension’s customers at any time who have Individual CustomerCapital. Collective CustomerCapital can contribute to increasing the interest on Individual CustomerCapital. In this way, it is possible to transfer an amount every year from Collective CustomerCapital to Individual CustomerCapital until Collective CustomerCapital has been exhausted. This means that customers with Individual CustomerCapital will be given the opportunity to receive a high interest on their Individual CustomerCapital. Over a number of years, Collective CustomerCapital will be distributed to both “existing” and “new” customers with Individual CustomerCapital.
Collective CustomerCapital is – as the name suggests – a collective reserve. This means that you will not get a share of Collective CustomerCapital if you transfer your pension plan to another pension supplier or if you cancel your pension plan.
As a rule, CustomerCapital as a whole gets at least the same interest every year as PFA Pension’s shareholders’ equity before tax.
What about the risk?
Along with the shareholders' equity and Collective CustomerCapital, Individual CustomerCapital forms part of PFA Pension's capital base. By placing savings in Individual CustomerCapital, PFA Pension’s customers have a share in the profit PFA Pension generates. However, Individual CustomerCapital is also to cover for any losses in PFA Pension. As long as Collective CustomerCapital remains, this will cover Individual CustomerCapital's share of any losses. When Collective CustomerCapital has been exhausted, Individual CustomerCapital will, as a rule, be subject to the same risk as the shareholders’ equity. This means that Individual CustomerCapital may be reduced (negative interest) and, in the last resort, be completely exhausted.
Accumulated Individual CustomerCapital cannot be converted into ordinary savings. Thus, deselecting CustomerCapital means that no further payments will be made to CustomerCapital.
Generally, Individual CustomerCapital will follow the cancellation of the pension plan, for instance, in connection with transfer to another pension supplier. However, this will not apply if PFA Pension does not meet the solvency requirement.
Average interest rate, payouts and CustomerCapital
When the payouts from your average interest rate plan begin, it is no longer possible to have CustomerCapital. Instead, your individual CustomerCapital will be transferred to your savings.
Regulations on CustomerCapital – market rate
Regulations on CustomerCapital – average interest rate
Changed terms and conditions of CustomerCapital as at 1 January 2019
As at 1 January 2019, PFA Pension has made the following changes to the terms and conditions of CustomerCapital:
1. As from 1 January 2019, any positive interest on Individual CustomerCapital will be paid into your ordinary savings plan instead of into Individual CustomerCapital.
2. As from 1 January 2019, Individual CustomerCapital will no longer be accumulated in connection with transfer of savings from other pension suppliers to PFA Pension or in connection with internal transfers in PFA Pension. This means that 5 per cent of transferred savings will no longer be placed in Individual CustomerCapital. Individual CustomerCapital will still be accumulated in the long term by means of regular payments and single payments to pension plans.
You can view the changed terms and conditions of CustomerCapital applicable to pension plans in PFA Plus in your terms and conditions of pension at My PFA under Documents.
You can view the changed terms and conditions of CustomerCapital applicable to pension plans in the average interest rate environment which are not in PFA Plus at pfa.dk/conditions, where you must enter the number “BXE170(01-19)”.
You can read more about the reason for the changes in CustomerCapital here.