DENMARK - The Danish pension system is vulnerable to low interest rates, low equity and property prices and needs to be closely monitored, according to an IMF report released yesterday.
Denmark is suffering from the effects of having to achieve high guaranteed returns for the duration of “in-force” policies in an environment where higher returns are difficult to come by.
“Although several measures have been implemented to increase provisions and capital, and for hedging interest rate through rate risk derivatives, the overall risk in the pension sector still needs to be closely monitored, “ stated the report.
Even though the life insurance and pension fund industry is reportedly well-funded, the pension system could be put under strain by increased longevity, now a problem for pension schemes in many developed countries.
The report warns that this range of risk factors means risk management by is a serious issue in the country and careful supervision is necessary to ensure the long term provision of pensions in Denmark.
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