The value of assets in the Finnish earnings-related pension system declined by €14.8bn in 2022, falling to €242.8bn by the end of the year, the Finnish Centre for Pensions (ETK) has revealed.

The nominal investment return over the year was -5.9 per cent, while the real return was -13.8 per cent.

More than half (53 per cent) of Finnish pension assets were invested in equities, while 28 per cent were in fixed income, 10 per cent were in real estate investments and 9 per cent were in ‘other’ investments, such as hedge funds.

ETK noted that the allocation of the investment portfolio did not change much in 2022, with 23 per cent in domestic assets, 17 per cent in euro-area investments and 60 per cent in global assets.

In light of the findings, the pension company called for discussions on improving investment returns by adjusting the risk level, which it stated could ensure the long-term security of investments as pension funding continues to weigh heavily on the country’s ageing population.

“The financial dependency ratio is changing rapidly,” commented ETK director, Allan Paldanius. “Now we have two pensioners per three working people, but in a few decades, the ratio will be four to five.

“If the equity weight in pension investing was raised by 10 percentage points, pension assets could be improved by 0.3 percentage points.

“This could lower the earnings-related pension contribution by 0.8 percentage points on average.”

Other options mentioned by ETK included raising pension contributions, increasing the wage sum or cutting pension expenditure.

ETK said that “tough decisions” needed to be made in the Finnish parliament, with Paldanius adding that the Finnish pension system “cannot show a deficit in the long run”.

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