The State Pension Fund of Finland (VER) made an investment return of 7.7 per cent (market value) in 2023, up from 6.8 per cent in 2022, it has revealed.

The real rate of return was 4 per cent in 2023 (-14.6 per cent 2022). Over the longer term, VER’s average nominal rate of return over the past 10 years is 5.4 per cent and real return 3.3 per cent. The average nominal five-year return is 6.4 per cent and real return 2.9 per cent.

At the end of 2023, the market value of the VER’s assets amounted to €22.8bn (€21.6bn in 2022). Of all the investments, fixed income instruments accounted for 40.3 per cent, equities 53.3 per cent and other investments 8.0 per cent of the total. The rest of the effect of risk-adjusted allocation was due to derivatives.

VER’s two large asset classes, liquid fixed-income investments and listed equities, gave positive returns in 2023. The return on liquid fixed-income instruments was 6.9 per cent and listed equities 11.3 per cent. Of the other asset classes, the best performance was private credit funds at 8.5 per cent and other fixed-income investments at 7.9 per cent.

“The investment markets made a successful recovery from the previous year's slump. The expectations of a relaxation of monetary policy boosted returns in the last quarter. VER's long-term returns have remained at a sound level,” VER CEO, Timo Löyttyniemi, said.

“The strong recovery of the stock markets was driven by positive corporate earnings performance, although there are signs of a slowdown in economic growth. In the global context, US technology companies are outperforming other companies. Geopolitical and economic uncertainties are clouding the current positive mood in the markets.

“VER’s net contributions to the government budget will increase in the future as a result of the amendment to the Act on the State Pension Fund and rising pension expenditure. Now the net transfer to the government budget was 2 per cent of the Fund’s assets, but it is expected to increase to 4–5 per cent in the coming years. These factors will limit the Fund's growth in the future and create new investment challenges.”

In 2023, VER received approximately €1.7bn in pension contribution income and transferred some €2.1bn to the government budget. In 2024, VER is required to contribute an amount equivalent to 41 per cent of the state’s annual pension expenditure to the government budget. The amounts to be transferred will continue to increase with the growing pension expenditure.

At the end of 2023, the pension liabilities under the state pension system amounted to €101bn. The funding ratio was 22.7 per cent.

---