Danish pension company PFA has launched a new index-based pension product, PFA Indeks Plus, in response to growing customer demand for lower-cost index investing within pension savings.

The new product will be available to PFA’s 1.3 million customers and use the same investment profiles and risk-reduction framework as the company’s existing PFA Plus and Klima Plus products.

However, PFA Indeks Plus will use a simpler investment approach, automatically tracking selected indices rather than relying on active selection of stocks and bonds.

PFA claimed this would make the product cheaper to develop and administer, reflecting the lower-cost characteristics typically associated with index investing.

PFA investment director, Kasper A. Lorenzen, said the launch followed increasing demand from customers wanting to invest all or part of their pension savings in an index-based product.

“We want to meet this [demand], and we have therefore now launched PFA Indeks Plus - a pension product with the same investment profiles and risk reduction as our existing Plus products, but with an index-based investment approach," he said.

While the overall product design will be familiar to existing PFA customers, the underlying portfolio will differ from its actively managed offerings.

Lorenzen explained that PFA Indeks Plus would automatically follow selected indices, with no active selection of equities or bonds.

The product will also not hedge currency exposure on equities and will exclude unlisted investments such as property and private equity.

Despite the simplified investment approach, PFA said the product would retain several features not always found in basic index products.

These include ensuring that companies included in the selected indices meet PFA’s responsible investment policy, providing ongoing customer advice and access to digital tools that provide recommendations on investment choices.

PFA Indeks Plus will also include automatic portfolio rebalancing and risk reduction over time, features that PFA noted were not standard across all index products, including some already available through its ‘Du invester’ platform.

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