Minister wants to ease investment restrictions at ATP – but rejects "gambling" with citizens' pension savings

Danish Minister of Employment Peter Hummelgaard now puts into words why the government wishes to ease the investment restrictions at state-run public pension fund ATP. At the same time, the social democrat rejects criticism of fast-track legal processing.

Danish Minister of Emploment Peter Hummelgaard. | Photo: Jens Dresling/Ritzau Scanpix

The Danish government intends to loosen the restrictions so that a greater share of savings in the state-run public pension fund ATP can be placed in risk-bearing investments, business media Finans recently revealed. This happens after a bout of criticism that the restrictions on investment policy are too strong, which has made it harder for the pension fund to produce returns.

In short, the government intends to give the board of ATP access to recommend the placement of up to 40 percent of savings in risk-bearing investments. Today, this share is 20 percent. ATP will be under obligation to let the rest of the savings earn interest at a determined rate, which will be effected through bonds and financial instruments that are currently exhibiting a negative real interest rate.

The proposal to loosen restrictions has been backed by Professor at Copenhagen Business School Jesper Rangvid, while others have also criticized that the risk level is still too low. Finally, the government has been criticized for linking the proposal with the extraordinary payment of holiday allowances to citizens later this year. Several spokesmen from the opposition are struggling to see the connection.

The minister in question, the Minister of Employment Peter Hummelgaard, has not commented on the proposal and the criticism until now, as he was on holiday.

In a written response to FinansWatch, the minister articulates why he thinks the proposal is important.

"With this proposal, the board of ATP will have the option of recommending that a greater part of savings is invested freely. The board estimates this might help ATP carry on as a relevant contribution to the national pension scheme, because in the situation we have right now, bonds and other normally secure investments provide very small returns," says the minister.

No reason to gamble

He emphasizes the only thing that's being adjusted is the right of recommendation. The board must state their reasons for their recommendation, after which the minister of employment will assess the recommendation.

"In my view, the assessment should take into consideration that ATP is a pension saving scheme at its core. We have to keep in mind that at major part of Danish pensioners only have the state pension and ATP as their means of supporting themselves. For this reason we need to be meticulous and avoid ending up in a place where we might risk gambling away the pension funds of our citizens," Peter Hummelgaard says.

Practical considerations behind fast-track processing

FinansWatch has asked the minister how the 40 percent estimate was arrived at, but the minister gave no reply.

However, he does comment on the criticism regarding the decision to fast-track the proposal alongside the proposal of freeing the frozen holiday allowances, which is meant to help the economy get through the corona crisis.

"In connection with the implementation of the stimulus measures, which incorporates the payment of the frozen holiday allowances and the establishment of a recapitalization fund, we have had to adjust the ATP legislation, and on the basis of a recommendation from ATP's board, we have included the right of recommendation on this occasion for the sake of practicality," explains the minister.

Liberals open to negotiation

The labour market spokesman for the Danish Liberal Party Hans Andersen tells FinansWatch the party would be open towards looking at loosening the restrictions on ATP's investment policy, but in line with the minister he believes that "we must tread carefully, as we are responsible for the Danish citizens' future pension funds."

However, he has difficulty understanding why the proposal must be fast-track processed along with the other proposals.

"We need to figure out whether it's an independent bill. It's hard for me to understand the reasoning behind fast-track processing it now."

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