Investment Profile B to Profile Low

A higher expected return despite higher fluctuations in the short term
With the new profile design, you benefit from the fact that shares typically generate a higher return than, for example, bonds. In their latest forecast, the Danish Council for Return Expectations, which is an independent council established by the trade association Insurance & Pension Denmark (IPD), expected global shares to generate a return of 7.1 per cent annually over the next 10 years, while the corresponding return on government and mortgage credit bonds is just 3.0 per cent. Accordingly, a higher proportion of shares and investments with similar risks will mean that you achieve a higher expected investment return and thus higher expected payouts in retirement.

The higher expected return on shares is due to the fact that companies benefit from the momentum of the economy. As the economy grows, companies will make more money, and this will be reflected in their share price. At the same time, an investment in shares will typically have a higher level of protection against rising inflation as companies can often pass on the rising inflation to customers by increasing prices. In this way, companies can maintain earnings even if inflation rises. This is not the case with investments in bonds where returns are typically eroded by rising inflation.

Furthermore, history clearly shows that shares have typically generated a better return than, for example, bonds. However, higher returns also come with a higher investment risk, meaning greater fluctuations in the return from year to year. However, since pension is a very long-term saving, it is more relevant to look at the risk over a number of years rather than from year to year.

There is obviously no guarantee that even with a long investment horizon, shares will also, in the future, generate a better return than bonds and other safer investments. However, as long as the global economy continues to grow, which has been the case throughout history, it is likely that companies can continue to generate increasing profits and, with that, returns for investors.

Our analyses show that the greater proportion of shares etc. will, in the long term, give you a higher expected return on investment and thus higher expected payouts during retirement. Similarly, the increase in expected payouts is smaller if you have a shorter time until retirement as you will have less time with a high proportion of shares etc.

In the following, you can see two simplified calculations showing the expected difference in payouts from a 20-year instalment pension with the current investment profile B and the new Profile Low, respectively. 

When we calculate the expected payouts at retirement, it is a forecast calculated according to certain assumptions. To illustrate the uncertainty, we also calculate the payout at high and low returns, respectively. The two figures show the payouts if the financial markets develop significantly more favourably or less favourably than expected. The payout will most likely (90 per cent) fall between the ‘high return payout’ and the ‘low return payout’.

You should be particularly aware of the risk if you are approaching retirement
When you are approaching retirement, you should be particularly aware that the risk of your savings will increase and that we, as a new feature, will continue the gradual reduction of the risk after you have started receiving pension payouts. We believe this will increase your expected pension assets and thus your expected pension payouts. However, it will also mean that the fluctuations in your savings can increase, especially in the short term.
 
If you are unsure whether you have the right investment profile, you can easily and quickly get help from the investment guide at My PFA, where you can also change investment profile. From 1 April 2025, the guide will be updated with the new profiles, but you can consult it already now to find out which investment profile is right for you. If you choose to change profile before 1 April 2025, you will automatically be transferred to the new profile on 1 April 2025.

Are you planning to retire early?
If you plan to retire earlier than the retirement date stated in your pension plan, you should pay special attention to the fact that the risk on your savings plan will be gradually reduced relative to the retirement date stated in your pension plan and not based on any earlier retirement date.

If you are unsure whether you have the right investment profile, you can easily and quickly get help from the investment guide at My PFA, where you can also change investment profile. From 1 April 2025, the guide will be updated with the new profiles, but you can consult it already now to find out which investment profile is right for you. If you choose to change profile before 1 April 2025, you will automatically be transferred to the new profile on 1 April 2025.

Do you prefer as small fluctuations in your savings as possible?
Some people prefer as small fluctuations in their return and thus in their savings as possible – that might be because they cannot sleep at night when the value of their savings increases and decreases in the short term or because their financial situation is vulnerable or they are approaching retirement. If this applies to you, you should be particularly aware that the risk on your savings plan increases in the new profiles. It increases because we believe that it will increase your expected pension assets and thus your expected pension payouts. However, it will also mean that the fluctuations in your savings increase in the short term.

If you are unsure whether you have the right investment profile, you can easily and quickly get help from the investment guide at My PFA, where you can also change investment profile. From 1 April 2025, the guide will be updated, but you can consult it already now to find out which risk profile is right for you. If you choose to change profile before 1 April 2025, you will automatically be transferred to the new profile on 1 April 2025.

Are you approaching retirement and do you prefer as few fluctuations in your savings plan as possible?
If you are approaching retirement and your financial situation is vulnerable, you should be particularly aware that the risk of your savings will increase and that we, as a new feature, continue the gradual reduction of the risk after you have started payouts. We believe this will increase your expected pension assets and thus your expected pension payouts. However, it will also mean that the fluctuations in your savings increase in the short term. In general, we recommend customers who are approaching retirement and whose financial situation is vulnerable to choose a more cautious approach to the risk on their savings plan.

If you are unsure whether you have the right investment profile, you can easily and quickly get help from the investment guide at My PFA, where you can also change investment profile. From 1 April 2025, the guide will be updated with the latest changes, but you can consult it already now to find out which investment profile is right for you. If you choose to change profile before 1 April 2025, you will automatically be transferred to the new profile on 1 April 2025.

Your savings will be transferred from investment profile B to the new Profile Low where you will keep your payout protection cover. With payout protection cover, 10 years before your retirement, your savings will gradually be converted to some special funds with extra low risk to ensure a cap below your future payouts. The closer you are to retirement, the less your savings will be affected by the transfer to Profile Low as the majority of your savings will be invested in the special funds.

If you have more than 10 years until retirement, the investment of your savings will not yet be affected by the payout protection cover, and until that happens (10 years before retirement), you will have the proportion of shares and similar investments applicable to your new Profile Low.