Order on the Setting of Maximum Guarantee Contributions and Tariffs in the Labour Market Supplementary Pension

Order on the Setting of Maximum Guarantee Contributions and Principles for Annual Tariffs in the Labour Market Supplementary Pension

Pursuant to Section 8c, subsections 2 and 3, first sentence, of the Act on the Labour Market Supplementary Pension, cf. Act Consolidation Act No. 1110 of 10 October 2014, as amended by Act No. 1159 of 8 June 2021, it is hereby ordered, following a proposal from the Board of the Labour Market Supplementary Pension and after consultation with the Danish Financial Supervisory Authority:

Setting of Maximum Guarantee Contribution

Section 1. Contributions relating to the period from 1 January 2008 are divided, after deduction of amounts for financing death benefits, cf. Section 16 of the Act on the Labour Market Supplementary Pension, into a guarantee contribution and a bonus contribution, cf. Section 8c, subsection 1 of the Act on the Labour Market Supplementary Pension. The guarantee contribution is used for the accrual of guaranteed pension, and the bonus contribution is transferred to the bonus potential of the Labour Market Supplementary Pension.

Subsection 2. The guarantee contribution may not exceed 80% of the contribution after deduction of amounts for financing death benefits, cf. Section 16 of the Act on the Labour Market Supplementary Pension.

Subsection 3. The guarantee contribution constitutes a fixed share of the contribution and is set once a year for the following year. The actual annual guarantee contribution used is determined at a level that ensures that the Labour Market Supplementary Pension can at all times meet its obligations.

Setting of Principles for Annual Tariffs

Section 2. The annual guarantee contribution is divided into an interest contribution and a market contribution. The market contribution may not exceed 25% of the guarantee contribution. The size of the interest contribution and the market contribution is determined once a year for the following year by the Minister for Employment following a proposal from the Board of the Labour Market Supplementary Pension.

Subsection 2. Members acquire pension from the guarantee contribution in accordance with the tariffs set for the interest contribution and the market contribution, respectively, relating to the relevant year.

Subsection 3. The pension acquired for the market contribution is subsequently adjusted upwards or downwards with the return achieved on the investments in the portfolio linked to the market contribution. The portfolio is invested according to principles set by the Board of the Labour Market Supplementary Pension, including the portfolio's risk level.

Subsection 4. In order to reduce the risk of the pension changing significantly shortly before the retirement date, the calculated pension based on the market contribution will, up to the member's state pension age, be converted into a guaranteed life annuity in a phase-in period. The period must be at least 5 years. Which birth cohorts begin the phase-in in the coming year is determined once a year for the following year by the Minister for Employment following a proposal from the Board of the Labour Market Supplementary Pension.

Section 3. When setting the tariff for the interest contribution, a market-value-based accrual interest rate is used, cf. Section 8c, subsection 2 of the Act on the Labour Market Supplementary Pension. The market-value-based accrual interest rate is determined by the Board of the Labour Market Supplementary Pension as a market interest rate curve up to the point in time when the tariff is set.

Subsection 2. The market-value-based accrual interest rate used when setting the annual tariffs according to subsection 1 is guaranteed for a lifetime period, unless the Board of the Labour Market Supplementary Pension sets a shorter period for the guarantee, which is subsequently replaced by new guarantee periods, where the tariff is calculated at the market interest rate applicable at that time. The member's pension is written up or down when setting a new period until the last period preceding the member's state pension age, where the tariff is calculated at the market interest rate applicable at that time, which is fully and lifetime guaranteed. The length of the guarantee period for both the interest contribution for the coming year and upon expiry of previously set guarantee periods is determined by the Board of the Labour Market Supplementary Pension once a year simultaneously with the setting of the tariff for the following year.

Subsection 3. When setting the tariff for the market contribution, there is no interest element.

Subsection 4. The technical basis for setting the tariffs, including the inclusion of a forecast for the development in life expectancy as well as for the acquisition and calculation of pension for interest and market contributions, follows from the Labour Market Supplementary Pension's pension and provision basis, which is available at www.borger.dk.

Entry into Force

Section 4. The Order enters into force on 1 January 2022.

Official Gazette A 2021 Issued on 8 December 2021 30 November 2021. No. 2295. Ministry of Employment, case no. 2021-8146 BE009132

Subsection 2. Order No. 141 of 28 February 2008 on the setting of maximum guarantee contribution and tariff in the Labour Market Supplementary Pension is repealed.

Ministry of Employment, 30 November 2021 Mattias Tesfaye / Simon Gravers Jacobsen 30 November 2021. No. 2295.