Good year for the State Pension Fund of Finland

Published 2017-02-28 at 11:41

The return on the investments by the State Pension Fund of Finland (VER) reached 6.7 per cent in 2016 (4.9 per cent in 2015). The real rate of return was 5.6 percent (5.1 percent).

VER’s average nominal rate of return over the past five years is 7.4 per cent and real return 6.3 per cent. The average nominal 10-year return is 4.5 percent and real return 2.8 per cent.

At the end of 2016, the market capitalisation of VER’s investments amounted to EUR 18.8 billion (EUR 17.9 billion in 2015). Of the investments, fixed income instruments accounted for 46.0 per cent, equities for 45.0 per cent and other investments and derivatives for the rest.

Of the asset classes, the best returns were yielded by infrastructure investments at 13.8 per cent and real estate investments at 11.9 per cent. Listed equities yielded a return of 9.7 per cent and liquid fixed-income instruments 4.0 per cent.

“The level of returns in 2016 was good and helps reinforce the financing base of the state pension system. Similarly, the five-year real return clearly exceeds the rate of return necessary for attaining the target funding ratio. In contrast, the average return over the past 10 years – a period which includes both the financial crisis and the most difficult moments of the euro crisis – would fail to achieve this target,” says CEO Timo Viherkenttä.

“Aside from infrastructure and real estate investments, the strong performance in 2016 was aided, in particular, by fixed-income investments in emerging markets.

“The positive mood in the investment market has so far held up in the current year as well. A carefully diversified investment portfolio is a sound precaution in view of the choppy seas created by positive macroeconomic news on the one hand and political uncertainties on the other,” says Viherkenttä.

In 2016, the State Pension Fund received approximately EUR 1.5 billion in pension contribution income and transferred some EUR 1.8 to the government budget. Every year, VER contributes to the government’s annual budget an amount equivalent to 40 per cent of the state’s total pension expenditure. The amounts to be transferred increase continuously with increasing pension expenditure.

For the first time in history, the funding ratio of the state pension system exceeded 20 per cent in 2016.

Further information:

CEO Timo Viherkenttä tel.: +358 9 2515 7010.

Established in 1990, the State Pension Fund of Finland (VER) is an off-budget fund through which the state prepares to finance future pensions and equalise pension expenditure. VER is an investment organisation responsible for investing the state’s pension assets professionally. At the end of December 2016, the market value of the Fund’s investment portfolio stood at EUR 18.8 billion.