Asset levels in Finnish earnings-related pension schemes fell by €1.3bn in the second quarter to stand at €182.9bn at the end of June, as share prices fell and pension payouts overtook contributions, according to data from the Finnish Pension Alliance TELA.
The amount of assets held in equities and equity-type investments dropped to €87.6bn at the end of June from €90.2bn at the end of March and shrank as a proportion of overall assets to 47.9% from 49%, the analysis showed.
Fixed income investments grew over the same time period to €78bn, or 42.7% of overall earnings-related pension assets, from €77bn, or 41.7%.
Property investments were unchanged in absolute values overall from three months before at €17.1bn, though they increased slightly as a proportion of all assets to 9.4% from 9.3%.
TELA analyst Peter Halonen said: “This development has been affected by the fact pension costs are now higher than pension revenues – i.e. pensions now being paid out are more than the amount workers and employers are paying in as pension contributions.”
He said, on top of this, the pension providers are facing a challenging investment environment, with returns diminishing as the year progresses.
“In particular, share prices have fallen in the second quarter,” he said.
However, the value of pension funds’ assets has been growing steadily, having quadrupled over the past 20 years, despite dips in 2008 and 2011, TELA said.
TELA chief economist Reijo Vanne added that, while investment returns will cover part of the financing of pensions in Finland, the level of pension contributions is the more important factor.
“The financial stability of the earnings-related pension system requires long-term contributions on the level agreed within the pensions reform, and the preparation for this is already in place,” he said.
Under the terms of the Finnish pension reform, contributions within the earnings-related pension system are expected to stabilise at 24.4% from 2017 onwards, Vanne said.
“This secures the financing of future pensions.”