The buoyant state of pension provision in Iceland has been confirmed by the first annual report of the Icelandic Financial Services Authority(FSA), just published.
The FSA, which began operations last year, took over the functions of the Bank Inspectorate of the Central Bank of Iceland and the Insurance Supervisory Authority. During its first year of operation it has overseen a number of changes in the regulatory environment of pension funds, and at the same time has seen net assets accumulated for pensions increase by some 15.5% to ISK407.3bn (e5.6bn) at year-end 1998, a real increase of 14%.
The real rate of return on these funds assets for 1998 was 7.5% down from 8.1% in the previopus year.Funds’ total income net of pension and other payement s totalled ISK129.7bn in 1998, up fromISK82.6b. Premiums and contributions rose to ISK36.7bn, up by 40% from ISK26.3bn. Current maturities in 1998 amounted to ISK14.4bn as opposed to ISK12.4bn in 1997.
According to the report expenses are also down over the year, appearing as 0.12% of the average of net assets for pension payments, compared with 0.15% in 1997. This may not be too significant, however, since a considerable amount of investment expense which would have appeared as operating expenses in 1997, has been included in the calculation for of real rates of return on pension fund assets instead.
The 66 funds now operating, down from almost 100 as a result of mergers, have total assets which according to the report account for almost 50% of the credit system’s domestic liabilities, a good indication of the extent of the pension fund system in Iceland. Of these, however, 11 no longer receive premium payments. Of the remaining active funds 29 are defined contribution schemes without guarantee, 17 are defined schemes with employer guarantee, and 10 are private pension schemes.
New accounting rules introduced at the end of 1997 mean some changes from the requirements of earlier legislation with regard to the assessment of balance sheet items and the layout of annual financial statements.
Accordingly some of the statistical data included in the first report are not fully comparable with information given in years prior to 1997. Kevin Hall