Finnish investment assets in earnings-related pension system reach €248bn

The total amount of investment assets in the Finnish earnings-related pension system reached €248bn at the end of March 2022, the Finnish Pension Alliance (Tela) has revealed.

This represents an increase of €15bn from the same point last year, as the earnings-related pension assets stood at €233bn at the end of March 2021.

Tela also found that, during the first quarter of the year, assets decreased by around €7bn.

Investment assets in the private sector accounted for €156bn and investment assets in the public sector accounted for €93bn.

The summary also showed that the investment returns for the first quarter of 2022, in nominal terms, was -2.2 per cent and in real terms, -5.3 per cent.

Tela provided a breakdown of the change in different investments, finding that returns on investments in equites and fixed-income investments fell by 3.2 and 2.5 per cent in nominal terms respectively, whilst returns on real estate and alternative investments rose by 1.2 and 1.3 per cent respectively.

In the longer term, according to Tela, and increasing amount of investments have been diversified on the global investment market.

As at the end of March 2022, 22 per cent of assets were invested in Finland, 16 per cent were invested in other euro area counties and 61 per cent were invested in non-euro area countries.

By comparison, as at the end of 2010, around one third (33.8 per cent) of the assets were invested in Finland, 28.8 per cent in other euro area countries and 37.4 per cent in non-euro area countries.

Tela analyst, Kimmo Koivurinne, said: “In this situation, however, the Finnish earnings-related pension system had an ace in the sleeve in terms of financing: the solvencies of earnings-related pension providers, which had hit record-high figures thanks to last year’s good returns.

“Solvency refers to the risk-bearing capacity of private-sector pension providers, i.e. how much assets each pension provider has in relation to its liabilities, where ‘liabilities’ means the pensions for which the pension provider is responsible.

“Investment income increases solvency capital, while in weak times on the investment market, solvency capital also weakens.

“After the first quarter, the average solvency of pension insurance companies had fallen only slightly. The average solvency position of the companies was 1.7 times the solvency limit that the solvency capital must exceed.

“Strong solvency secures the funding of earnings-related pensions and reduces future pressure to raise pension contributions.”

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