Finnish earnings-related pension assets increased by €7bn in the first quarter of 2024 reaching a record high of €258bn, according to analysis by the Finnish Pension Alliance (Tela).

The nominal yield on earnings-related pension assets in Q1 2024 was 3.4 per cent, Tela stated. The real yield, adjusted to remove the effects of inflation on total return, was 2.6 per cent.

“Global stock markets rose strongly in the first quarter, thanks to the solid performance of the American economy and an AI-boosted tech sector. The appreciation of assets in the first months of 2024 was largely down to stock investments,” Tela analysit, Kimmo Koivurinne, said.

“Anticipated interest-rate cuts also supported the stock markets, even if the cuts will probably be slower than markets expected at the start of the year,” Koivurinne added.

Regarding pension financing, Koivurinne explained that young people and children will contribute to the pensions of those currently in work. However, some of those future pensions can be financed by returns on investments, instead of significantly raising pension contributions from their current level.

The share of pension funds and their yields used to cover pension expenses annually has grown over the years and continues to do so. In private sectors, funds are used to cover just over a fifth of pension expenses. That share will rise in the near future to a quarter. In other words, 25c of every €1 paid as pensions will come from funds.

“However, when speaking about funds and their returns, it’s worth remembering that the returns, be they positive or negative, do not influence the size of pensions paid to pensioners. The returns are only of significance for the pension contribution paid by employers and employees,” Koivurinne said.

The figures for earning-related pension assets compiled by Tela pertain to the pension assets managed by pension providers, pension funds, pension foundations, the Pension Fund for the Employees of KELA, KEVA, the Church Pension Fund, the Farmers’ Social Insurance Institution, the Seafarers’ Pension Fund, the Bank of Finland’s Pension Fund, and the State Pension Fund of Finland.

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