DENMARK - Pension manager ATP Group said it made a DKK4.3bn (US$825m) contribution in the first half of the year to cover the cost of increased life expectancy among Danes, three and a half times last year's provision.
ATP Group made the announcement in its first half report, where it announced overall investment returns of DKK7.5bn in the first six months of the year, though the payment of the life expectancy provision and other pension activities reduced the overall profits to DKK3.3bn.
"The high provisions this year were attributable to an increase in life expectancy for both men and women. The increase in life expectancy for men was slightly lower than in the preceding years. Women, on the other hand, have seen a significant increase in life expectancy over the past year," the report said.
ATP contributed DKK1.2bn in 2008, DKK700m in 2007 and DKK3.9bn in 2006.
ATP CEO Lars Rohde said two years ago, the pension fund introduced a life expectancy model that combined the expected survival age of Danes with those of member countries of the Organisation for Economic Co-operation and development.
The new system is meant to dampen the volatility of the provisions. But, "even a rise and fall of car accidents can make an impact" on the contribution rate, he said. Rohde said in light of DKK300bn in pension liabilities, the life expectancy provision is not exceptionally large.
ATP also said its overall reserves now total DKK50.8bn.
Despite investment gains in the past six months, Rohde approached the coming months with caution.
He said: "The results achieved for (the first half) are highly satisfactory. However, a challenging autumn lies ahead with a risk of new price falls."
In the first half of the year, ATP had to meet a wave of redemption requests from account holders in the SP scheme following the Danish government's move to allow them to withdraw their pension savings.
Between June 1, when the withdrawal period went into effect, through today, Danes redeemed DKK38bn before tax, said ATP spokeswoman Anne Schumacher, well outpacing the DKK25bn ATP had estimated earlier in the year. (Global Pensions; April 24, 2008)
As a result, the asset allocations in the SP sub-funds were reduced by 25% each. The portfolio allocation of clients up to age 45 targeted a 60% equity exposure; for those over aged 45, the equity allocation is about 20%.
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