Answers to the top 5 questions on market turmoil and your pension savings

Trump's tariffs have not only created turmoil in the financial markets but also among Danish pension customers. If this applies to you, read on as PFA’s private economist and savings expert, Camilla Schjølin Poulsen, answers the five most frequently asked questions from PFA’s customers.

1. Should I change the risk on my savings and, for example, switch to an investment profile with fewer stocks?
It is completely understandable that one can become anxious in these wild times, where there are almost daily new announcements about stock developments. But I advise keeping a cool head and sticking to your investment strategy. For most of us, our pensions need to be invested for many years to come, and history fortunately shows that crises come and go, and that stocks over time rise more than they fall. We can also see this if we look at the past five years. Here, a typical customer in PFA’s recommended profile has achieved a return of around 45 percent despite the negative development in 2022.

If you save in our lifecycle product (about 90 percent of all our market rate customers do), you should also know that your stock risk will automatically be reduced as you get closer to retirement. A 70-year-old customer with medium risk thus automatically has a lower stock share than a 45-year-old with medium risk, which means you do not need to change your risk profile just because the retirement date is approaching.

If you are unsure about your investment profile, it may be a good idea to spend five minutes taking the investment guide on My PFA. Just remember to answer objectively with both gut feeling and brain, so your answers are not too colored by red numbers in the financial markets. It is also a good idea to consider your entire wealth in the answers. The less your pension savings fill in your total wealth, and the more stable the rest of the wealth is placed, the greater risk you can generally afford to take on your pension.

2. I am close to retirement. Should I postpone my retirement and thus my payouts?
The short answer is no – you should not change your retirement plans. If we are talking about an annuity pension or lifetime pension that will pay out for many years ahead, the current turmoil does not greatly affect the annual payout, and your stock share should already be reduced somewhat – see the previous answer. If you have just started your retirement, you will typically also have many investment years to both recover the loss and create positive returns. The typical PFA customer thus lives for 22 years after the state pension age.

If it is a matter of a lump sum payout, such as age savings or capital pension, and you do not yet need all the money, you can consider whether the payout should be postponed a bit.

In any case, it is good to know the options for influencing the payout of your pensions, so here are some main rules:

• The payout of the lifetime pension should generally be started as soon as one retires. You can certainly pause the payout, but I rarely recommend it.
   
• The payout of the annuity pension should be carefully planned according to your needs, but also based on considerations for optimizing tax and state pension supplement. In principle, the payout should not start until you need it, and you should remember that you can always extend the payout period but not shorten or pause it.
   
• Payout of capital pension/age savings should only happen when you need it, and for example, with age savings, you can certainly choose to take it out gradually or continuously if it suits better.

Feel free to seek individual advice from us before you start the payouts.

3. What will the turbulent development mean for my pension payments?
The turbulent markets will not affect the monthly payout for the rest of the year. Every year in November, we calculate the returns of the last 12 months and compare them with a number of other factors, including the industry's expectations for future returns. This calculation then triggers an adjustment in the pension payout in January. It is completely normal for the pension payout to be adjusted slightly from year to year. Typically, we are within plus/minus 5 percent in average adjustments among our pension customers, so you should prepare your personal finances for this if you have a pension in market rate.

We cannot yet say what the adjustment in 2023 will look like, but I can say that the adjustments in recent years are as shown below – Note that during this period we have had both the Corona crisis, Ukraine crisis, and inflation crisis.

Average adjustment among our customers compared to the payouts the previous year:

• 2020 +0.1%  
• 2021 -3.5%
• 2022 +4.9%
• 2023 +1.7%
• 2024 -0.5%
• 2025 +3.5%
   

4. I have experienced that it has not been possible to trade on ‘You Invest’ during normal opening hours. Why have you closed for trading?
The turbulent markets will not affect the monthly payout for the rest of the year. Every year in November, we calculate the returns of the last 12 months and compare them with a number of other factors, including the industry's expectations for future returns. This calculation then triggers an adjustment in the pension payout in January. It is completely normal for the pension payout to be adjusted slightly from year to year. Typically, we are within plus/minus 5 percent in average adjustments among our pension customers, so you should prepare your personal finances for this if you have a pension in market rate.

Under normal circumstances, you can trade on My PFA on weekdays during the regular trading window from 10 AM to 4 PM. This can change in times of significant turmoil, as we are experiencing right now. The reason is that the funds in both PFA Invests, PFA Flexible, and You Invest often contain securities traded on many different exchanges around the world. These exchanges typically open for trading from 9 AM to 5 PM in their local time zone. Some funds on Du Invests will usually only quote prices once a day.

If there is uncertainty about whether the available prices are accurate, PFA may choose to close the trading window completely or partially and only execute your choice when accurate prices are available again. This can happen, for example, in periods of market turmoil like now, where price fluctuations are significantly larger than usual. You can therefore safely request your desired change in My PFA – even if the trading window is closed. It will then be executed the next time accurate prices are available.

5. How often do you update the return on my pension savings on My PFA?
The returns from PFA’s investment profiles are typically updated daily and often several times a day. The same applies if you have invested via You Invest. When there is significant market turmoil, as we have experienced recently, it is not always possible to show the returns with the same frequency, as the turmoil can make it difficult to obtain accurate prices – see the previous answer.

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