The head of one of Finland’s earnings-related pension funds has highlighted the strengths of having an occupational pension system with many providers with different ways of operating, and also said people looking to safeguard the partly-funded system must focus social policies on work.
Kari Välimäki, who is set to retire as chief executive officer of the Seafarers’ Pension Fund at the end of this year, said in an interview in the newsletter of Finnish pensions alliance TELA: “Different operating models are part of the strength of the decentralised system and ensure, among other things, that investment activities are targeted at companies of different sizes and that different social groups are part of a unified system.”
According to the article, Välimäki sees it as a challenge that the occupational pension system seems to be becoming more and more concentrated.
He said decentralisation not only meant the number of actors in the system, but also different operating models, such as public pension institutions and foundations and funds, citing his own fund, which acts as a maritime industry fund as part of the earnings-related pension scheme.
In the last few years, the pension insurance companies – which provide the bulk of earnings-related pensions in Finland – have reduced in number to four from five after Etera merged with the larger player Ilmarinen.
Asked about the challenges and opportunities he saw on the horizon for the Finnish pension system, Välimäki said: “In the longer term, the challenge is certainly a change in the age structure, but it can adapt, by pursuing good employment and social policies. The pension system does not solve the problems caused by lower birth rates in advance.”
The majority of current and future pension funding was based on employers’ and employees’ pension contributions, he said, and only partly on investment income.
“In a partially-funded system, investment returns are important, but sometimes it feels as if the debate is spinning too much in towards investment and the priority of work is forgotten,” he said.
“An occupational pension scheme will last if it is understood that it is part of social insurance and that work is the best social policy,” Välimäki said in the TELA article.
The CEO, who has headed the Seafarers’ Pension Fund for eight years, after a career of more than 30 years at the Ministry of Social Affairs and Health, said the Finnish pension system had a strong foundation and enough capacity to adapt.
But despite the system’s many strengths, he said the employment pension institutions were quite sensitive to criticism.
“I think the system is so strong that it must also withstand healthy criticism,” Välimäki said.
When Välimäki steps down as CEO of the Seafarers’ Pension Fund, which had €1.21bn in pension assets at the end of 2019, he will be succeeded by Jari Puhakka, currently the fund’s CIO.