DENMARK – A Danish government minister offered the country's pensions sector help by facilitating higher-yielding bond options and extending the easier discount yield-curve – but threatened legislation if the industry failed to improve transparency.
Annette Vilhelmsen, the Danish minister for business and growth, laid out challenges for the pensions and insurance industry.
She told the annual meeting of industry association Forsikring & Pension: "You should contribute towards managing the challenges we face in creating growth and jobs."
Given today's low interest rates, it makes sense to look for new investment areas, she said.
"From the government's side, we are working towards improving the framework so you can undertake sound, venture capital investments – investments that can increase the returns for the pensions sector while at the same time contributing to growth at home," she said.
An example of this is commercial bonds, she said.
In the autumn, the government is to present legislation to make it more attractive to use so-called agents for bond issues.
"This can make direct bond issuance easier and in this way more accessible for others besides very big companies," Vilhelmsen said.
At the same time, the new legislation will create better opportunities for financial institutions to issue bonds within bundled commercial loan vehicles.
This could give the institutions more lending options, she said.
Meanwhile, Vilhelmsen also said the government would like to try to remove the barriers to public-private partnerships (PPPs).
"The Competition and Consumer Authority has just launched a new investigation," she said.
"This should contribute to breaking down some of the barriers that prevent councils and regions from using the PPP model."
Vilhelmsen also referred to the agreement formed in June last year between the government and the pensions sector to help pension funds cope with low bond yields.
It included a change to the long end of the discount yield curve used to calculate pensions liabilities, raising it to generally agreed long-term projections for growth and inflation.
"It is my impression that the agreement still allows you to invest for the long term for the benefit of customers," she said.
The agreement is due to expire at the end of 2013, she said, but added that, after the summer, she would call for the parties to meet to discuss an extension of the pact.
Pension funds should also make sure consumers continue to have confidence in the Danish pension system and the companies within it, Vilhelmsen said.
She noted that the industry had agreed last June to carry out an evaluation of the steps it was taking towards transparency.
She said it was important the initiatives taken actually gave consumers a better understanding of their pensions than before – as opposed to simply giving them a better chance of understanding.
"These are two different things," she said. "And I would like to stress that we in the government are ready to supplement the initiatives you in the industry have taken, if the interests of consumers indicate there is a need for it."