Cautious Danes Miss Out on $37 Billions in Returns, Study Finds

(Bloomberg) -- Danish households are missing out on hundreds of billions of kroner because they keep their savings in bank accounts where they collect little or no interest thanks to negative central bank rates, according to an investment fund group.

Had households chosen to put just half of those savings into investment funds, they would have increased their wealth by as much as 229 billion kroner ($37 billion) over the past decade, according to a report by Investering Danmark. Even the most risk-averse investment strategies would have netted an additional 87 billion kroner.

The report’s findings appear to back government efforts to encourage people to invest, with Business Minister Brian Mikkelsen proposing equity savings accounts with lower tax rates to entice savers to switch. The central bank, on the other hand, notes that Danes are probably cautious after the financial crisis and don’t expect negative rates to last forever.

No country has had sub-zero rates for as long as Denmark. The central bank first went negative in 2012 as investors sought havens from Europe’s sovereign debt crisis and economists don’t expect a return to positive rates before 2020.

Banks have so far held back on passing the cost to retail customers and the experience is still triggering some unexpected reactions: Households are hoarding cash in banks - about 840 billion kroner, according to November central bank data.

©2017 Bloomberg L.P.