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Ilmarinen urges preparation for long-term future of pension system

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Rising employment in Finland will support pension contribution volumes this year despite economic weakness, according to the country’s largest pension fund.

However, Helsinki-based Ilmarinen warned that the country’s low birth rate meant preparations must be made for the long-term future for Finland’s pension system.

Despite expected slower economic growth both in Finland and other industrialised countries compared to 2018, domestic employment and payroll were expected to continue to develop favourably, Ilmarinen said in its first-quarter report.

“This will have a positive impact on pension providers’ premiums written in 2019,” the pension insurance firm said.

Jouko Pölönen, Ilmarinen’s chief executive, said the outlook for pension financing in Finland would be stable in upcoming decades, according to a long-term calculation concerning the sustainability of the pension system. The Finnish Centre for Pensions published its latest figures on pension sustainability last month.

“The pension contribution can be kept below 25% up until the 2050s,” he said. “However, in the long term, a decline in the birth rate will cause significant pressure to raise the contribution, which we need to prepare for well in advance.”

First-quarter gains hit 4.6%

Ilmarinen’s investment assets grew to €47.4bn at the end of March, from €46bn at the end of December.

The fund’s first-quarter return amounted to 4.6%, compared with a loss of 0.1% in Q1 2018.

Equity investments generated a return of 8.8%, while fixed-income investments returned 2%. The long-term average nominal return was 5.7%, corresponding to a real annual return of 4.2%, Ilmarinen reported.

The pension insurer’s solvency ratio strengthened by 1.1 percentage points to 124.8%, with solvency capital at €9.6m, compared with €8.9m at the end of 2018.

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