Denmark's Biggest Pension Fund May See 40% Surge in Inflows

(Bloomberg) -- Denmark’s biggest pension fund, with about $120 billion in assets under management, may end up handling even more money as a result of plans to make retirement savings obligatory for the unemployed and others receiving government support.

Under the proposal in parliament, funds currently allocated for social, health and labor programs will be rerouted to ATP, the state-backed pension fund to which all working Danes must contribute.

If passed, the proposal would raise annual net payments into ATP by as much as 4 billion kroner ($605 million) by 2030, according to Bo Foged, ATP’s interim chief executive officer. Contributions last year totaled 9.87 billion kroner.

The new monies would improve ATP’s economies of scale and lower costs, a key goal as volatile markets and record low rates make returns harder to get. The pension fund on Wednesday sold its U.K. business, NOW: Pensions, after reporting last week a loss of 3.7 billion kroner on its investment portfolio.

The Hillerod, Denmark-based fund has been moving asset management in-house to reduce costs, with expenses related to external advisers falling in 2018 to their lowest in at least five years (excluding performance fees.)

“External managers are more expensive, and since returns are looking more moderate, costs become more important,” Foged said.

The mandatory savings measure, which has the backing of the country’s biggest political parties, is encountering some opposition from unions and other pension funds. In letters last week to Denmark’s employment ministry, they said distributing the contributions to ATP was ill-considered and instead recommended they go to the union-backed pension plans.

Denmark is widely considered to have one of the world’s best pension systems.

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