Industriens Pensions to prioritise pension saving for members

Denmark’s Industriens Pension has revealed it is going to prioritise pension saving for low-contribution members over insurance.

From 1 June 2021, members with contributions below DKK 800 a month will not have to pay for insurance, instead, all of their contributions will go towards saving for a pension.

Industriens Pension is making the change to reflect the changing labour market, which it said is seeing more temporary or part-time workers.

A typical contribution to Industriens Pension is divided between savings and insurance. For most members, the vast majority of payments go to the savings section. However, if the member contribution is low, a large share is spent on insurance rather than saving for old age.

Therefore, any new members joining the scheme from 1 June 2021 with a monthly payment of DKK 800 or below will not be covered by loss of ability to work or certain critical illness insurance, meaning they won’t pay for this either. Instead, the money will go towards their pension. If their contribution increases above DKK 800, then the member will automatically receive a pension scheme with insurance coverage.

For existing members, an automatic calculation will be made for any member making a payment of DKK 800 or below on whether they can afford the insurance. If insurance coverage is not viable, the member will receive a letter stating that their insurance has ceased, so that as much as possible is used for savings. However, members can also choose to keep their insurance and, for example, adjust the coverage.

“We look forward to offering even more flexibility in the scheme. For example, if you do not work full time or have shorter employments – which we see more and more members have – the savings part often has a higher priority. We have listened to this, and we are therefore changing the pension scheme this summer,” Industriens Pension insurance director, Joan Alsing, said.

When the changes to the pension scheme enter into force on 1 June 2021, insurance in the event of loss of earning capacity and insurance in the event of certain critical illnesses will no longer be standard for new members with small pension contributions. Just as existing members with smaller deposits can opt-out of all insurance.

"We have carefully calculated where it made sense to set the limit. DKK 800 helps to ensure that savings are made up for retirement and not too much is spent on insurance. The key is that the contributions to Industriens Pension must primarily ensure a good income in retirement. Insurance is also important, but it must be affordable,” Alsing concluded.

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