Danish pension funds' potential use for military expenditure explained
In a significant shift, Denmark's pension funds and banks are set to play a more prominent role in funding the country's military build-up. This development is part of a collaborative effort between these financial institutions, organised under new joint initiatives such as the Financial Defense and Preparedness Partnership.
The partnership, established by key financial industry associations, aims to increase investments into the defense sector. This move is in response to growing security challenges, including the war in Ukraine and cyber threats.
Simon Kollerup, defense spokesperson for the Social Democrats, has expressed support for this increased role of the pension sector and financial institutions in strengthening Denmark's defense. A similar enthusiasm can be found within the Moderate party.
"There's a need for everyone to pull in the same direction," said Kollerup.
Industry organisations Finans Danmark and Forsikring & Pension have called for the financial sector to play a larger role in funding the country's military build-up. They express a desire to take "societal responsibility" in their investments, while also expecting a return.
Pension funds and banks in Denmark are showing interest in investing in the country's defense sector. No specific projects or the amount of investment involved in this model have been detailed as yet.
The proposed investment partnerships primarily involve a collaborative effort between pension funds and banks. The Financial Defense and Preparedness Partnership is a formal cooperation between Finance Denmark and Insurance & Pension Denmark (F&P), bringing together financial institutions to strengthen defense financing and preparedness by leveraging their investment capacity.
This partnership represents a public-private collaboration to channel pension capital into defense-related projects and companies, thereby supporting Denmark’s military build-up through market-based finance rather than relying exclusively on government budget increases.
Danish pension funds have significantly increased their investments in the defense industry. They have doubled their holdings from DKK 9 billion in early 2024 to DKK 19 billion by April 2025, reflecting their strategic shift towards defense-related assets for both financial returns and national security reasons.
The model suggests that a public sector entity would hire a private contractor to complete a project, with the public sector later taking over operation and maintenance. Kollerup suggests that it may be worth paying more to ensure construction projects are delivered on time and at the agreed price.
The Social Democrats and the Moderate party have given a positive response to this model. Simon Kollerup, defense spokesperson for the Social Democrats, has stated that he is not concerned about this model potentially leading to additional costs for taxpayers.
Denmark and other NATO member states have committed to spending five percent of GDP on defense. With significant investments planned for the defense sector in coming years, this collaborative approach between the public and private sectors could provide a sustainable funding solution.
No prior context is provided about the amount needed to save for a pension in Denmark. However, with pension funds becoming proactive players in ensuring robust financing for Denmark’s enhanced defense capabilities, this collaborative approach is set to redefine the landscape of defense funding in the country.
- The Financial Defense and Preparedness Partnership, a joint initiative by key financial industry associations, aims to increase investments into the defense sector, including through societal responsibility-focused investments by pension funds and banks.
- In response to growing security challenges and the need for everyone to pull in the same direction, industry organisations Finans Danmark and Forsikring & Pension have called for the financial sector to play a larger role in funding the country's military build-up, with potential interest in investing in the defense sector.
- The proposed investment partnerships and funding solutions could provide a sustainable path for Denmark and other NATO member states to meet their commitment of spending five percent of GDP on defense, redefining the landscape of defense funding in the country with pension funds becoming proactive players.
