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Finnish FIM21bn state fund to demutualise

FINLAND – The FIM21bn (e3.5bn) LEL Pension Fund , which enjoys a state monopoly over pensions under the Temporary Employees’ Pension Act (LEL) and the Pensions Act for Performing Artists and Certain Groups of Employees (TaEL) is planning to demutualise into a pension insurance company.

The move would result in a loss of LEL’s monopoly on the labour sectors but would give it the same status as other insurance companies and pension funds in the field of second pillar Finnish pensions.

The move is related to the current debate over simplifying the complicated private sector pension law in Finland.
“At LEL we’re planning to change the organisation’s structure into a limited company in stages. This would mean a change in the law, but letting LEL into the market,” says Lauri Koivusalo, managing director of the LEL Pension Fund.

The timetable for de-mutualisation is not going to be very hectic since LEL is required by law to offer its services.
“We are planning to start the process during next year, but it requires a parliament hearing because it is a legal matter,” says Koivusalo.

He admits that it is much more difficult to say anything about possible Finnish pension reform on a wider scale as the labour market players disagree on whether pension benefits should be based on life-long average pay or on an average of last ten year’s wages.
Kari Puro, managing director of insurance company Ilmarinen, and chairman of a working committee dealing with the private sector pension reform, agrees with Koivusalo on the problems between the employee side and the employer side.

“The calculation of pensions has become the dividing matter in the debate. We’ll have to see if the proposal slashes someone’s pension, as has been argued, and whose pension and in what way it slashes it,” says Puro.

“We’ve also discussed on how to possibly compensate these pensions, because the current project is not about cutting anyone’s pension, it’s more of a technical restructuring. The reports should be ready by early autumn, so during this autumn and winter we’ll find out whether a consensus on the matter can be found,” he adds.

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