Finnish earnings-related pension companies have reduced their operating costs by 34 per cent in real terms over the past two decades, according to analysis of their confirmed financial statements for 2025.

The analysis, undertaken by the Finnish Pension Alliance (Tela), found that while total operating expenses increased slightly between 2024 and 2025, the longer-term trend shows a significant decline in costs.

The total operating expenses of Finland's earnings-related pension insurers, excluding investment-related costs, amounted to €438m in 2025, up by €6.6m from €431.4m in 2024.

However, Tela chief actuary, Hanna Mäkinen, stressed that operating costs have fallen significantly over the longer term.

"Costs vary somewhat from year to year. However, when viewed over a longer period – the past 20 years – they are clearly declining. In 2007, total operating expenses amounted to €667m in 2025 price terms. Taking inflation into account, costs have fallen by as much as 34 per cent," she said.

Operating expenses have also fallen sharply relative to the amount of pensions paid. The ratio declined from around 3 per cent in 2007 to 1.2 per cent in 2025, indicating a significant improvement in efficiency.

According to Mäkinen, IT is one of the largest cost items for pension insurers, with IT expenditure accounting for more than 40 per cent of total operating expenses in 2025.

The systems underpin a wide range of activities, including the processing of employment records and pension applications, pension payments and customer services.

However, the pension sector has monitored IT spending since 2012 as part of its efforts to improve cost efficiency.

“Pension insurers are actively developing their IT systems to improve the efficiency of processes and administration. This has contributed to the decline in overall operating costs,” she said.

In addition, Mäkinen attributed much of the long-term decline in operating expenses to the company-specific administration cost component of Finland's earnings-related pension contribution system, which she said has encouraged pension insurers to improve efficiency.

The administration cost component covers the costs of administering statutory earnings-related pensions, excluding investment activities. Since 2023, each pension insurance company has been responsible for setting its own administration cost component at a level sufficient to cover its anticipated operating costs for the following year.

As a result, pension insurers that are able to deliver services more efficiently can set a lower administration cost component.

“This is also an important competitive tool, as the company-specific administration cost component is directly reflected in the earnings-related pension contributions paid by employer clients,” Mäkinen added.

Operating expenses include IT costs but exclude investment management fees. These are financed through investment returns, while other operating costs are covered by the administration cost component included in earnings-related pension contributions.

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