The Danish parliament decided to found LD at the end of the 1970s with the object of managing what were known as Denmark’s â€œfrozen cost-of-living allowancesâ€. As part of the automatic adjustment of wages to cover the cost of living, these allowances should have been paid to employees to offset inflation. The government decided to pay them as a supplementary lump sum pension upon retirement.
LD has not received any contributions since 1980, but its assets have increased to about EUR 8,010m because cumulative returns exceed the payments made by the fund. Since 1980 LD’s investments have yielded an average return of 10,8% per annum after tax and costs.
In March 2004, the Danish parliament adopted a new act on LD Pensions authorising LD Pensions to manage capital for other pension institutions. Furthermore, the act makes it easier for members aged 60 to withdraw their savings with LD Pensions and will allow members to move their savings to other pension institutions. In the wake of the new act, LD has launched measures to capitalise on its asset management competencies, and efforts are being made to render investments more liquid.
LD pays a lump sum when a member reaches retirement age and leaves the workforce permanently (or when a member reaches the age of 60). Since its formation in 1980, LD has paid out the funds in 1.5m accounts, which leaves the number of accounts from which balances have not been distributed at 1m.