Pension Institutions and Annuities in Denmark

This paper considers the overall structure of the Danish pension system, reviews the relative role of different types of pension institutions, and discusses their asset allocation strategies and investment performance. The paper also examines the regulation and supervision of providers of pension services, the growing reliance on risk-based supervision, and the application of the so-called contribution principle. The Danish pension system includes a modest universal social pension with a supplement for low-income pensioners and near universal participation in occupational and personal pensions that are primarily based on defined contribution plans. The annuity market is well developed: 50 percent of annual contributions are allocated to the purchase of deferred annuities, while immediate annuities are also purchased at or even after retirement. However, detailed comprehensive data on the rate of annuitization are lacking. Distinct features of the Danish pension system include the widespread use of profit participating contracts with minimum guaranteed benefits and regular provision of bonuses, covering both the accumulation and payout phases, and extensive use of group deferred annuity contracts. A new traffic light system with periodic stress testing has resulted in greater emphasis on asset liability matching and hedging strategies by pension institutions and a shift in investment policies in favor of foreign bonds and long-term swap contracts.

Bibliographic Details

Main Authors:	Andersen, Carsten, Skjodt, Peter
Language:	English
Published:	World Bank, Washington, DC 2007-12
Subjects:	ACCOUNTING, ADDITIONAL PAYMENTS, ADDITIONAL SAVINGS, ANNUAL CONTRIBUTIONS, ASSET ACCUMULATION, ASSET ALLOCATION, ASSET ALLOCATIONS, ASSET LIABILITY MATCHING, AVERAGE BENEFIT, AVERAGE CONTRIBUTION, AVERAGE INTEREST, AVERAGE INTEREST RATE, AVERAGE WAGE, BALANCE SHEET, BANKING INSTITUTIONS, BANKS, BENEFIT ENTITLEMENTS, BENEFIT PLAN, BOND, BONDS, CALCULATION, CALCULATIONS, CAPITAL BASE, CAPITAL REQUIREMENTS, CAPITALIZATION, CHOICE OF FUND, CONSERVATIVE ASSUMPTIONS, CONSUMER, CONSUMER INFORMATION, CONSUMER PROTECTION, CONTRIBUTION, CONTRIBUTION PLAN, CONTRIBUTION PLANS, CONTRIBUTION PRINCIPLE, CONTRIBUTION RATE, CONTRIBUTION RATES, CONTRIBUTION RECORD, CONTRIBUTION SCHEMES, CREDITORS, CURRENCY, CURRENCY RISK, DEFERRED ANNUITIES, DEFERRED ANNUITY, DEFINED CONTRIBUTION PENSION, DIRECT EQUITY INVESTMENTS, DIRECT INVESTMENTS, DISABILITY, DISABILITY BENEFITS, DISABILITY INSURANCE, DISABILITY PENSIONS, DISCOUNT RATE, DISPOSABLE INCOME, DIVERSIFIED PORTFOLIOS, EARLY RETIREMENT, EARNINGS, ECONOMIC ACTIVITY, ECONOMIC FRAMEWORK, ECONOMICALLY ACTIVE PEOPLE, EMPLOYER PENSION, EQUITIES, EXCHANGE RATE, EXPENSE RATIOS, FINANCIAL DISTRESS, FINANCIAL MARKET, FINANCIAL MARKETS, FINANCIAL POLICY, FINANCIAL SECURITY, FINANCIAL SITUATION, FINANCIAL SYSTEMS, FOREIGN EQUITIES, FUND MANAGERS, GOVERNMENT BOND, GOVERNMENT BONDS, GOVERNMENT SECURITIES, INCOME, INCOME GROUP, INCOME SOURCE, INCOME TAX, INDIVIDUAL ACCOUNTS, INDIVIDUAL PENSION, INFLATION, INSURANCE, INSURANCE COMPANIES, INSURANCE POLICIES, INSURANCE PRODUCTS, INTEREST RATE, INTEREST RATES, INTERNATIONAL BANK, INVESTING, INVESTMENT CHOICE, INVESTMENT EXPENSE, INVESTMENT MANAGEMENT, INVESTMENT PERFORMANCE, INVESTMENT POLICIES, INVESTMENT POLICY, INVESTMENT RETURN, INVESTMENT RETURNS, INVESTMENT RISK, INVESTMENT RISKS, INVESTMENTS IN EQUITIES, JOINT-STOCK COMPANIES, KIND OF INVESTMENT, LABOR FORCE, LABOR MARKET, LEVEL OF CONTRIBUTIONS, LIABILITY, LIFE EXPECTANCY, LIFE INSURANCE, LIFE INSURANCE COMPANIES, LIFE INSURANCE COMPANY, LIFETIME, LOW INCOME, LOW INCOME GROUPS, LOW-INCOME, LOWER INCOME, LUMP SUM, LUMP SUMS, MARGINAL RATE, MARKET CONCENTRATION, MARKET CONDITIONS, MARKET DISCIPLINE, MARKET INTEREST RATE, MARKET SHARES, MARKET TRENDS, MARKET VALUES, MARKETING, MATURITY, MAXIMUM CONTRIBUTION, MINIMUM BENEFITS, MORTGAGE, MORTGAGE BONDS, MORTGAGES, MUTUAL FUNDS, OCCUPATIONAL PENSION, OCCUPATIONAL PENSION SCHEME, OCCUPATIONAL PENSION SCHEMES, OCCUPATIONAL PENSIONS, OCCUPATIONAL SCHEMES, OWNERSHIP STRUCTURES, PENSION, PENSION ACCOUNTS, PENSION ASSETS, PENSION BENEFITS, PENSION COMPANIES, PENSION CONTRACT, PENSION CONTRACTS, PENSION CONTRIBUTIONS, PENSION FUND, PENSION FUNDS, PENSION INCOME, PENSION INVESTMENT, PENSION PLAN, PENSION PLANS, PENSION PRODUCTS, PENSION PROVIDER, PENSION REFORMS, PENSION SAVING, PENSION SAVINGS, PENSION SCHEME, PENSION SYSTEM, PENSION SYSTEMS, PENSIONERS, PERSONAL PENSION, PERSONAL PENSION PLANS, PERSONAL PENSIONS, PRIVATE PENSION, PRIVATE PENSION PROVISION, PRIVATE PENSIONS, PROBABILITIES, PUBLIC PENSION, PUBLIC PENSION SCHEMES, REAL ESTATE, RESERVES, RETAIL FINANCIAL SERVICES, RETIRED, RETIRED WORKERS, RETIREMENT, RETIREMENT BENEFIT, RETIREMENT BENEFITS, RETIREMENT PENSION, RETIREMENT PRODUCT, RETIREMENT PRODUCTS, RISK MANAGEMENT, RISK PROFILES, RISK SHARING, RISKY ASSETS, SAFETY NET, SALARIES, SAVINGS, SECURITIES, SHARE CAPITAL, SHAREHOLDER, SHAREHOLDERS, SOCIAL SECURITY, SOLVENCY, STAKEHOLDERS, STOCKS, SUPERVISORY AUTHORITY, SWAP, TAX ADVANTAGES, TAX DEDUCTION, TAX INCENTIVES, TAX PROVISIONS, TAX RATES, TAX TREATMENT, TAXABLE INCOME, TOTAL COST, TRADE UNIONS, TRANSFER PAYMENT, TRANSFER PAYMENTS, TYPES OF PENSION, UNEMPLOYED, UNEMPLOYMENT, UNEMPLOYMENT BENEFITS, VALUABLE, VALUATION, VALUE OF PENSIONS, WAGE, WAGES, WITHDRAWAL, WORTH, YIELD CURVE, YOUNGER PEOPLE,
Online Access:	http://documents.worldbank.org/curated/en/2007/12/8877300/pension-institutions-annuities-denmark https://hdl.handle.net/10986/7605
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