Understand the calculations

The example is based on the expected returns for 1-10 years published by the Danish Council for Return Expectations applicable from the first half of 2024. This means that even though the calculation period is longer than 10 years, we have only made the calculation based on the return in years 1-10. We do so because we believe they are more accurate for our composition of investment profiles. The 1-10 year return assumptions provide a more detailed dataset across all asset classes in both the short and long term and better reflect the long-term risk premium (expected additional return compared with short-term bonds) of shares and similar investments.

The calculation is based on a simulated trend in the underlying assets where 10,000 different scenarios have been created. The expected return payout represents the average payout in the first year after retirement in the 10,000 scenarios. Based on the 10,000 scenarios, the uncertainty of future payouts can be determined. ‘High return payout’ and ‘Low return payout’ show your payouts if the financial markets develop significantly more favourably or less favourably than expected. The first year payout will most likely (90 per cent) fall between ‘High return payout’ and ‘Low return payout’.

Forecast at My PFA

The above examples will differ from the forecast you can see in the Payout Plan at My PFA. This is partly because the forecast at My PFA is based on a common industry standard from Insurance & Pension Denmark (IPD), which contains common return assumptions and methods for determining the low and high return scenarios. These forecast figures are also used at Pensionsinfo to ensure comparability across companies and pension funds.

Return assumptions 

The forecast uses the current return assumptions for the short term (years 1-5), medium term (years 6-10) and long term (years 11-) published by the Danish Council for Return Expectations. Expected long-term returns are lower for shares and similar investments and higher for bonds and similar investments – this is especially true for properties. Therefore, the expected benefit of changing the profile design will be smaller in your forecast at My PFA compared to the example above. The difference will be smaller the closer you are to retirement.

Method for determining the uncertainty 

‘High return payout’ and ‘Low return payout’ are determined at My PFA based on an approximate method as it is not possible to set up 10,000 scenarios when calculating the pension forecast at My PFA. The approximate method underestimates the annual payout in ‘Low return payout’. Therefore, the change in ‘Low return payout’ will be lower in your forecast at My PFA after the change to the new profile.

You can see all assumptions for the forecasts at My PFA.