Comparison: Investment returns

The Comparison of the investment returns of 22 earnings-related pension investors from northern Europe and North America, compiled by the Finnish Centre for Pensions, is unique. The results of the comparison will be published at www.etk.fi/en on December 2018.

The compared earnings-related funds have been divided into two groups based on their risk bearing capacity: those that are bound by sustainability regulations and those that are not. The former group consists of pension investors whose investment operations and return from investments are limited by solvency regulations. The latter group includes various buffer funds that can take higher risks and put a greater weight on equities in their investment portfolios.

The largest fund included in the comparison is the Norwegian Government Pension Fund Global (SPU). Its investment assets amount to nearly 1 trillion euros (for comparison, the total pension assets of all Finnish earnings-related pension providers is €200 billion).

Other exceptional investors compared are the largest Danish pension fund ATP and the CPPIB of Canada. The investment allocation of ATP differs from that of all other funds: 74% of its investment portfolio is in fixed-income investments.

The Swedish pension investors, AMF Pension and Alecta, are the most interesting objects of comparison from a Finnish point of view. Their investment operations are limited by similar provisions as those of Finnish pension investors.

The Dutch public sector pension fund ABP and the health sector fund PFZW are also good objects of comparison, although they have much larger investment assets (€600 billion) than the Finnish investors.

Online banking and pensions

Check your pension record while paying your bills online – that is what Jouko Pölönen, President and CEO of Ilmarinen Mutual Pension Insurance Company, would like us to be able to do. Ilmarinen is the largest private sector pension insurer in Finland when measured in terms of pension investments, closely followed by Varma.

The future of the earnings-related pension insurance business is heavily digital. A large part of the operations of earnings-related pension insurance companies deals with handling information.

The Incomes Register will play a huge role in launching a real-time pension record. Pension grows based on earnings, and Pölönen finds the online bank to be the most natural platform for presenting real-time data on pension accrual. “We want to take the pension record into the online bank to which people go anyway.”

Insurance justice for 100 years

The Insurance Court, established in 1917, was the first manifestation of the Finnish tripartite system in which the labour market organisations and the State resolved problems together.

At first, the Insurance Court processed appeals relating to only accidents at work and military injuries. Nowadays, it processes appeals within a total of 40 sectors.

In the 1970s, the number of appeals rose to over 12,000. Since the Accident Appeal Board was established in 1982, the number has stabilised at 6,000.

The average processing time in 2018 was less than 10 months. As the electronic handling of appeals is making a breakthrough, roughly half of the appeals are handled electronically.

Fair ruling is the main goal in cases involving social security. Roughly 11% of the appealed decisions, and nearly 20% of all appeals relating to earnings-related pensions, are amended each year.

Bronze medal to Finland

The Mercer Index ranks the Finnish pension system the third best in the world. For the fifth time, our system’s integrity rating is the highest in the world.

The Dutch pension system tops the list, ousting Denmark from its long-standing top spot. In practice, the score differences are marginal.

Finland’s ranking improved mainly because of changes made to the method of scoring pension replacement rates. “We’re lagging behind the Netherlands and Denmark in terms of our sustainability outlook. They have much larger pension assets than we have,” explains director Mikko Kautto of the Finnish Centre for Pensions.

The Mercer Global Pension Index ranks countries’ pension systems using criteria relating to the adequacy of pensions, the sustainability of the pension system and administrative integrity. The pension record contributes to our transparency, scoring full points in the subcategory measuring the communication between the system and the insured.

Leena Koski
Leena Koski



Finnish Centre for Pensions

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