PFA adjusts the investment risk in PFA Plus - PFA Invests

Automatic gradual reduction stabilises the savings

In the investment profiles in PFA Plus – PFA Invests, the investment risk on your savings will be gradually reduced automatically as you approach retirement. The automatic gradual reduction of the investment risk helps stabilise your savings concurrently with your approach to the time when your pension becomes due.

The period with the investment profile’s initial risk is prolonged

As from 1 January 2018, we will adjust the gradual risk reduction curve so that its starting date is postponed for 10 years compared to present day. This implies a prolonged period during which the investment profile keeps its original risk composition and a reduced period during which the investment risk is gradually reduced.
The risk level at the time of retirement will remain unchanged, but due to the later gradual risk reduction, you will have a greater investment risk during the period in which you approach retirement.

Increased life expectancy and higher retirement age

We adjust the gradual risk reduction curve due to the longer life expectancy of the population in Denmark and the fact that people retire later. At the same time, PFA expects that high-risk assets will generate additional return on the long term. That is why we estimate that our customers will generally accumulate more money for their retirement when PFA postpones the gradual reduction of their investment risk.

Changes broken down by profiles

Here, you can get an overview of the full period of gradual reduction in the individual investment profiles (after full implementation over 12 months). The course of the gradual risk reduction shows the expected allocation to the high risk fund in respect to years until before the pension becomes due:

 

Investment profile A:
From 19 to 9 years before the pension becomes due     

 

Investment profile B:
From 22 to 12 years before the pension becomes due       

 

Investment profile C:
From 23 to 13 years before the pension becomes due       

 

Investment profile D:
From 24 to 14 years before the pension becomes due      

 
PFA Pension can at any time and without notice adjust the distribution between the High-risk and Low-risk funds in the individual profiles and change the asset composition of the funds.

If your plan is already subject to gradual reduction

If your investment profile is already subject to gradual risk reduction, the changed gradual risk reduction curve will imply that as from 1 January 2018 you will gradually switch over to the new gradual risk reduction curve with a phase-in period of 12 months. This means that for a period of up to 12 months, your investment risk will lie between the old and the new gradual risk reduction curve. According to the new gradual risk reduction curve, the increased investment risk will depend on your investment profile and your age.       

The illustration shows what the change will mean to a customer whose investment risk is already being gradually reduced. The customer has profile C and 18 years until retirement. The high-risk rate was 56 % before, but after the change the high-risk rate will be 75 %.

Everything happens automatically, so you do not need to take action

You do not need to do anything as the adjustment of the course of risk reduction will happen automatically during the next 12 months.

As always, you can regularly follow your pension plan at My PFA (mitpfa.dk), where you can also go through PFA’s Investment Guide and get help clarifying your wishes for return and risk. Please note that the new gradual risk reduction curve forms the basis of the present display of the distribution of high-risk and low-risk funds at My PFA (mitpfa.dk) and that the display does not take the phase-in period of 12 months into account.

If you have any questions, please feel free to call us at (+45) 70 12 50 00.

Frequently asked questions

1. Why is PFA making these changes?

We adjust the gradual risk reduction curve due to the longer life expectancy of the population in Denmark and the fact that people retire later. At the same time, PFA expects that high-risk assets will generate additional return for the pension saver who invests for the long term. That is why we estimate that our customers will generally accumulate more money for their retirement when PFA postpones the gradual reduction of their investment risk.

2. The product was introduced in 2009 – and this is the first change since the introduction. Do you expect another 8-10 years to pass before more adjustments are made?

No. PFA will regularly evaluate how we can adjust our products to match the development trends in the market and society.

3. Have the initial and final risk levels also been adjusted?

No, they have not been adjusted. They match the levels of today, where the following initial and final risk levels apply to the High-risk fund:

Profile A - initial level 25 %, final level 10 %
Profile B - initial level 50 %, final level 20 %
Profile C - initial level 75 %, final level 30 %
Profile D - initial level 100 %, final level 40 %

In general, fluctuations may occur regularly between the High-risk and Low-risk funds. PFA Pension can at any time and without notice adjust the distribution between the High-risk and Low-risk funds and change the asset composition of the funds.

4. How soon will the change apply to the profiles for the customers, whose gradual risk reduction has already begun?

The change will be phased in within max. 12 months. For the customers who are closest to the new profile, the change will be implemented very quickly and for customers who are further from the new profile, the change will be implemented gradually within max. 12 months.

5. Is the gradual risk reduction the same for an instalment pension as for a lifelong life pension?

Yes, it is. We do not distinguish between the different tax codes.

6. Is it possible to keep the present gradual risk reduction curve and not switch to the new one?

No, it is not. Overall, we expect that our customers will have more money for their retirement after the adjustment of the profiles. We will therefore adjust the gradual risk reduction curve in all our profiles to the effect that the gradual reduction of the risk will be postponed. If you want another risk profile, we recommend that you go through PFA’s Investment Guide at My PFA in order to clarify your wishes for return and risk.

7. How will it be possible to increase the pension savings by maintaining the investment risk for a longer period of time and still have more or less the same risk at the time of retirement?

When we include in our calculations that assets with higher risk also generate an expected higher return, our analyses show that we can maintain the risk for a longer period of time and thus increase the likelihood of a larger pension at the time of retirement without causing any considerable increase in the risk (which would result in a smaller pension at the time of retirement).