Danish pension provider Velliv delivered a “very good” year for pension savers in 2024, with market returns between 11.2 and 14.3 per cent for a typical customer with medium risk and 15 years to retirement.

Despite the strong performance, the company warned of a potential decline in returns for 2025 as market conditions shift.

According to the update, the VækstPension Index delivered the highest return in 2024, which was 14.3 per cent, and was one of the year’s top-performing pension products across the industry.

Despite the chance that 2024 would end up as one of the best return years, this was not the case due to a late-year market dip in December, driven by increased volatility.

In its latest update, Velliv noted that although the first half of 2024 was marked by strong gains, the second half saw more turmoil in financial markets, characterised by more market turmoil.

Given this, Velliv Index and Velliv Aktiv performed in the best part of the market, with the VækstPension Index coming out ahead.

Furthermore, the group said market turbulence had characterised the beginning of 2025, attributing this to Donald Trump’s political program.

However, the firm said that the European economy was also facing "headwinds", with the important industry in Germany in a “critical” state and the possibility of an additional interest rate cut from the European Central Bank in 2025.

The group suggested that this reflected that the arrow on inflation appeared to be pointing downward again in 2025, despite the beginning of January seeing “slightly disappointing” figures for inflation developments.

Velliv said 2025 would be a year of economic growth, supported by falling inflation and further normalisation of monetary policy.

However, it stated that if the past few years are anything to go on, geopolitical conditions as well as fiscal and fiscal policy are important factors in the world economy. Therefore, it said it would keep a “special eye” on these risks in 2025.

The group also suggested that with the prospect of falling interest rates, it predicts that bonds in 2025 would contribute to the return with a solid return above its long-term expectations, which average 3 per cent.

“While bonds look cheap in our eyes, we believe that stocks are at the expensive end of the price scale. This is especially the case for the large companies in the US, which are mainly behind last year's big gains in the stock market,” the company stated.
 
It expects the 2025 equity return to be on par with the long-term average of 7 per cent.

It also said that it currently expects a return between 5 to 7 per cent for a balanced portfolio with 15-20 years until retirement.

---