Finnish occupational pension funds would have generated far fewer returns in recent years had they been mainly invested in Finland, pensions industry association TELA argues in its latest bid to quell calls for the sector to support the domestic economy.
Tiina Satti, head of legal affairs at TELA, whose members are insurers providing statutory earnings-related pensions, said: “Once again, ideas have been raised that employment pension funds should be directed more to supporting domestic growth.”
But she said investment by Finland’s pension funds was primarily guided by the goal of maintaining the sustainability of the pension system.
“According to the law, funds cannot be invested from other starting points,” she said.
TELA said that the investment reform, which is being developed as part of the pension reform in Finland, was aimed at increasing returns for pension funds, which could then be used to cover a larger proportion of pensions in payment, in the partly-funded system.
Investment income therefore bolstered the sustainability of the pension system, it said, adding that the geographical diversification of assets was a risk management matter.
Jari Sokka, director of analysis at TELA, said in the association’s commentary on the issue published on Friday: “The capital of earnings-related pension insurers does not flow abroad – it seeks out returns there.
“By investing abroad, we can make the growth of other countries benefit the financing of Finnish pensions.”
TELA said that soon, investment income would cover a quarter of earnings-related pension payments.
“If investments had been made mainly only in Finland, there would have been significantly weaker results than actual ones, jeopardising the sustainable financing of earnings-related pensions,” it said.
The association said that in the current debate, one justification for using pension assets for a specific, defined purpose – such as promoting domestic growth - had been the claim that there was no capital available in Finland for growing or new businesses.
However, TELA argued that both the study by the growth working group led by Risto Murto – the chief executive officer of pensions insurer Varma – and the finance ministry’s growth strategy report had come to the same conclusion in the spring, namely that there were bottlenecks in the availability of capital, but no significant problems.
“In Finland, the issue is not primarily about the availability of capital, but that business activities don’t attract enough domestic or foreign investors,” Sokka said.
“Earnings-based pension insurers are happy to invest in domestic targets if returns are expected.”
TELA spoke out in March, similarly rebutting calls for pension firms to invest more on their home turf.
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