The Icelandic Pension Fund Association (Landssamtök lífeyrissjóða, LL) this morning gave a picture of how the North Atlantic island’s pension funds’ investments fared last year, saying on average they had lost 12% in real terms.

The lobby group also said in a statement: “After the extremely good returns of the pension fund portfolio in recent years, there was a reversal last year.”

Last year had been characterised by unrest in international markets and increased inflation both in Iceland and abroad, it said, adding that the negative returns figure of 12% was based on the weighted average yield of all the funds’ portfolios, and took inflation into account.

“Pension funds look for long-term returns on investments, as their obligations are long-term,” LL said.

Domestic inflation was 9.6% in 2022, it said, with both stock and bond markets falling dramatically over the year. However, LL said the 10 and five-year averages for the funds’ real returns stood at around 4.6% and 4.0%, respectively. It said the levels were still well above the 3.5% standard return for obligations.

This time last year, the lobby group was praising the funds’ 10.2% 2021 return, which it said had exceeded the 3.5% benchmark for the third year in a row.

LL also said today that many Icelandic pension funds had already adapted the rights of their scheme members to the changed criteria that were confirmed at the end of 2021 by the Ministry of Finance and the Economy as the new calculation basis for life expectancy.

The new figures assumed that the average lifespan in Iceland would continue to rise in the coming years.

The pension funds were given a two-year implementation period, and the association said some were still working on the matter in consultation with the funds’ actuaries.

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