I&P Denmark develops risk labelling model for pension savers

Insurance and Pension Denmark (I&P Denmark) has developed a new model for risk labelling that will allow pension savers to assess their risk profile in their own pension company and compare with others.

The online solution will be introduced during 2022 by I&P Denmark and the Danish Financial Supervision Authority, with support from the Ministry of Business Affairs.

It aims to improve Danish people’s understanding of pension savings and the potential consequences of investing with or without guarantees.

I&P Denmark developed the model as an alternative solution to the fixed risk limits initiative, introduced in 2018, which it said had proven very difficult to make work in practice.

It noted that the fixed rate limit initiative did not take into account that different consumers have different risk appetites and therefore stifled innovation in the market as pension companies lacked opportunities to adapt products to customers’ needs.

I&P Denmark’s new online solution replaces the hard risk limits with a web-based benchmark solution where savers can compare the scheme in their own pension company against the schemes of other pension companies and see where they are on the risk scale.

“The pension companies make a great effort to ensure that the individual Dane has the best possible pension savings, and there are already good tools for that today,” commented I&P Denmark CEO, Kent Damsgaard.

“Now it will also be possible to compare the risk on the individual pension savings with similar schemes in other pension companies.

“It is important for us that the individual Dane can understand and relate to their pension savings and the associated risk.

“One must understand what it means whether one has a savings with an expected lower but more secure return or a higher but in turn more uncertain return.

“Therefore, I am very much looking forward to the fact that together with the authorities we can take the initiative to dress the Danes even better to understand their pension.”

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