ETK report highlights increase in Finnish pension assets

Earnings-related pension assets in Finland increased by €118.7bn between 2010 and 2021 to €257.5bn, according to a report from ETK.

Employees Pension Act (TyEL) assets made up the majority of earnings-related pension assets, at €161.1bn at the end of 2021.

ETK noted that pension assets had increased each year apart from a few exceptions, with the decline in investment assets in 2008, 2011 and 2018 temporarily reducing the amount of pension assets.

The total pension assets at the end of 2021 (€257.5bn) was relative to 102 per cent of Finland’s GDP.

The average real annual return of earnings-related pension investments fluctuated over the assessment period.

Despite the Covid-19 pandemic, 2020 was found to be a favourable investment year, particularly for equity investments.

Private sector investments yielded a real return of 122.2 per cent and public sector investments saw returns of 11.3 per cent in 2020.

Amid the financial crisis in 2008, Finnish pension investments saw their lowest return in the assessment period, reaching negative returns of between -15 per cent and -25 per cent for public sector and private sector pension investments.

The following year, 2009, saw the highest returns during the review period, of between around 14 per cent and 18 per cent.

Between 2007 and 2021, the exposure to investments in shares in the public sector exceeded that in the private sector by, on average, 7 percentage points.

The real rate of return on the earnings-related pension contributions of private sector workers fell from 6.6 per cent for those born in 1940 to 1.8 per cent for those born in 1975.

This level of return on contributions (1.8 per cent) has remained the same throughout the years to those born up to the year 2000.

“The main reason for the decline of the internal rate of return is the rise of TEL/TyEL contribution rates, which in turn is the result of the gradual phasing in of pension benefits as well as population ageing,” the report stated.

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