Troubles by the legion
As Iceland's financial sector went into meltdown, pension funds were called on to play a damage-limitation role. Jenna Gottlieb outlines the evolution of the crisis
In just a few short weeks, Iceland's economy unravelled faster than that of any western country during peacetime and pension fund executives were called upon to help shape policy and work towards a solution.
Just what the long-term impact on Iceland's pension system will be is unclear, but pension fund executives say the immediate task at hand is to stop the bleeding. "We're in the middle of a hurricane right now," says Hrafn Magnusson, managing director of the National Association of Pension Funds in Reykjavik. "At this moment no one knows how long this international financial crisis will last, although it is clear that it has hit Iceland especially hard. It is believed that in this maelstrom we are all going through,the assets of the country's pension funds will diminish by about 15 to 25%."
Iceland's pension funds hold considerable assets for the size of the country. At end-2007, there were 37 pension funds operating in Iceland, and the 10 largest account for 80% of the total assets in Iceland's pension system, according to the Financial Supervisory Authority (FME).
Total assets of the pension funds within the National Association of Pension Funds, an umbrella organisation for Icelandic pension funds, amounted to ISK1.7trn (€11.2bn) at year-end 2007.
"If we put the decrease of assets into context, a fall of 10-15% would mean that the pensions' assets would be akin to what they were by the end of 2006, and a decrease of about 20-25% would bring us back to the middle of