Denmark’s Danica Pension has reported negative returns for all Danica Balance customers in 2022, regardless of their chosen risk.

It noted that the differences in returns on high and low risk profiles were not large last year.

A customer with a high risk profile and 30 years until retirement received a return of -16 per cent, while a customer with a low risk profile and 5 years to retirement saw returns of -12 per cent.

The average saver with a medium risk profile and 20 years until retirement received a return of -14 per cent.

Danica Pension said that it was unusual that the difference in returns was not greater in such a turbulent year.

It attributed this smaller-than-expected difference to rising interest rates, which meant that the losses on bonds were of the same size as the falls in share prices.

The pension company noted that 2022 was a year of major fluctuations in the financial markers, with both stocks and bonds experiencing negative returns.

“The development in 2022 has meant that shares globally have fallen by around 15 per cent,” Danica Pension said.

“At the beginning of October, shares were down to -22 per cent, but towards the end of the year there have been nice increases, which have improved the otherwise very boring return.

“Interest rates have risen significantly in 2022 both on bonds with short and long maturities.

“The interest rates on bonds with short maturities are actually also higher than the interest rates on bonds with long maturities here at the turn of the year.

“It is the financial markets' way of indicating that a recession is on its way.

“The violent interest rate increases have led to a sharp fall in bond prices and, as a result, large negative returns on bonds.

“2022 has therefore been quite unusual, as there have been large losses on both shares and bonds.

“Now, however, interest rates have reached a level where it is expected that in the future bonds can once again be a balancing factor in a mixed portfolio, instead of falling to the same extent as shares.

“It has been almost impossible to avoid negative returns in 2022, even if you have chosen a low risk profile.”

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