Total assets in Finland’s partly-funded earnings-related pension system rose by €6bn last year to stand at €221bn, thereby covering roughly one third of the €700bn of liabilities, according to new overall 2020 investment results for providers in the system.
Pensions alliance TELA published the results, saying occupational pension funds’ total assets had slumped to €193bn in the first quarter of 2020 from €215bn as a result of the pandemic, and then regained €28bn between April and December.
Kimmo Koivurinne, TELA analyst, said: “The earnings-related pension providers achieved a real annual return of 4.6%, which can be considered a good result in the interesting year.”
Asset totals had recovered from their first quarter falls largely because of stock market growth, he said, with economic stimulus measures from central banks and governments and positive news of vaccine developments driving the rebound.
The figures also showed that domestic asset allocations expanded by two percentage points to 25% over the year, as did equity allocations, which rose by two percentage points to an average 52% weighting across the sector.
These increases came at the expense of foreign and fixed income assets, with weightings of investments in the rest of the euro area and and non-euro investments declining by one percentage point apiece to 17% and 58%, respectively, and fixed income investments decreasing by two percentage points an average 32% weighting, according to the lobby group.
TELA said Finland’s earnings-related pension providers saw an average return on equity investments of 7.9% in 2020, with fixed income investments generating a 1.2% return, real estate investments 1.3% and alternative investments – mainly hedge funds – 3.6%.
“Alongside financial market developments, attention is constantly focused on the outlook for the real economy,” Koivurinne said, adding that the stagnation of vaccine production and distribution was causing uncertainty – as was the plight of companies as the crisis continued.
Economic and employment developments were also important for the financing of occupational pensions, TELA said, since assets and their income only formed part of the financing.
TELA said the statistics included employment pension companies, TyEL funds of pension funds, public-sector pension funds Keva and the State Pension Fund (VER), the Kela Employees’ Pension Fund, the Church Pension Fund, the Bank of Finland’s Pension Fund and a group of special pension funds including the Farmers’ Social Insurance Institution (Mela) and the Seafarers’ Pension Fund (MEK).