Swedish occupational pension provider Alecta reported stronger solvency levels and 7.9% returns on its defined contribution (DC) product, Alecta Optimal Pension, in 2015 financial results but warned expectations for future returns should be reined in.
The pension fund produced a 5.8% return for its defined benefit (DB) pension compared with the 12.8% return achieved in 2014.
The DC product, by comparison, returned 14.9% in 2014.
Staffan Grefbäck, chief executive at Alecta, said: “The good return over many years and the low level of interest rates suggest future expectations should be kept low.”
He said the new year had started with turbulence on the financial markets, against the background of increased uncertainty about global economic growth.
“In the prevailing returns climate, costs and stable finances are becoming the key factors in the future in producing good pensions, and this is the area we are strong in,” he said.
The solvency ratio increased over the course of last year to stand at 171% at the end of December, compared with 159% at the same point a year before.
Over the last five years, Alecta said, its DC return has been 9.6% on average per year, 4.1 percentage points higher than the benchmark index for the same period.
Meanwhile, Finnish pensions insurance company Varma said it had made a 4.2% return on investments last year, compared with 7.1% in 2014, with equities generating the highest returns.
Risto Murto, Varma’s president and chief executive, said: “The company’s solvency remained at a high level, and premium income developed favourably in light of the muted development of the real economy.”
He described 2015 as a good year for Varma, with investments having continued to recover for seven years after the financial crisis.
Varma’s financial data showed that solvency capital edged lower as a proportion of technical provisions, ending the year at 31.4%, down from 34%.
The company’s executive vice-president Reima Rytsölä said the 2015 investment year had been highly volatile.
“Despite the fluctuating markets, Varma’s equity investments yielded a good return, but, as regards fixed income investments, the challenges of the zero-rate environment were realised, and yields were slightly negative,” he said.
Equity investments produced 8.8%, compared with 9.1% the year before, while Finnish equities returned 19.4%, up from 6.7%.
Fixed income investments made a loss of 0.4% in 2015, down from a 5.8% return the year before.
Real estate produced 3.35%, down from 3.8%.