The leaders of Finland’s largest pension institutions have defended the current state of the pension system, saying recent talk about reducing pensions is about weakness in state finances, not the system they manage.
Ilmarinen – one of the two mainstays of the Finnish earnings-related pension system on the private-sector side – said in today’s first quarter financial report that there had been much public debate early in the year on cutting pensions, the position of young people in the intergenerational chain, and the grounds for accruing pensions.
Mikko Mursula, chief executive officer of the €66.8bn mutual pensions insurance company, said: “The discussion may give the impression that the pension system is in need of a reform. However, this debate is the result of the weakness of public finances.
“The financial situation of our pension system is stable, and we are already retiring later than before,” he said.
In February, the Finnish Economic Policy Council (Talouspolitiikan arviointineuvosto) suggested measures such as eliminating pensions accrual for unpaid periods, including unemployment and parental leave, could help stem Finland’s rising public debt, while avoiding impact on the lowest paid.
Finance minister Riikka Purra responded, saying that cuts to pension accrual for unemployment, qualifications and the widow’s pension were all on the table in the next few years.
Risto Murto, CEO of Ilmarinen’s peer Varma, said this morning: “The lively discussion this spring regarding the retirement age and cuts reflects the pressure to find quick solutions for the state budget.”
However, in the €67.9bn pension provider’s Q1 report, Murto said that the pension system operated on a decades-long time span.
“It is vital that a long-term perspective remains the starting point for developing the pension system in the future as well,” he noted.
At public-sector pension fund Keva, CEO Jaakko Kiander said yesterday in the institution’s first quarter report that the crisis in Finland’s public finances was reflected in Keva’s own operations, with the number of public sector employees insured by the €74.1bn pension fund having started to decline.
At Veritas, which covers entrepreneurs in Finland and is the smallest of the four pension insurers in the private-sector earnings-related pension sector, CEO Elina Fogelholm, commented on this week’s announcement by the government on reform to the YEL self-employment pension system.
Fogelholm said the reform, which will shift the basis of contributions for small entrepreneurs to actual earnings from confirmed YEL income but keep confirmed income as an option provided it is at least half of actual earned income, was a step in the right direction.
“For small entrepreneurs, the most important issue was resolved, because the reform will make their situation easier,” she said, adding: “The logic of the new model is also reasonably easy to understand from an entrepreneur’s perspective.”
The financial reports released today and yesterday from the four institutions all show narrow losses on investments following the market plunge in March in reaction to the war between the US, Israel and Iran.
Keva, Ilmarinen, Varma and Veritas revealed losses for January to March of -0.2%, -0.5%, -0.1% and -0.3%, respectively.
Earlier this week, pension insurance company Elo reported a Q1 return that was just positive, at 0.2%.
