Finnish earnings-related pension provider Ilmarinen achieved an investment return of 8.6 per cent in 2024, alongside a "significant" cut in the carbon intensity of its pension investments, its latest update has revealed.

The provider's latest financial statement showed that the market value of its investments increased to €63.3bn, as investments yielded a return of €5bn.

In particular, Ilmarinen's equity investments yielded 14.1 per cent, while fixed income investments returned 4.4 per cent.

The group noted that global equity market returns were generally positive, although there were large regional and sector-specific differences, as whilst the equity market return in the United States was 25 per cent, this was 9 per cent in Europe.

In Finland in particular, the equity market return remained at 0 per cent, as short-term interest rates fell in line with central bank interest rate cuts.

However, despite the decline in short-term policy rates, long-term government bond interest rates rose moderately during the year, according to Ilmarinen.

The update also revealed that while the return on real estate investments was -0.9 per cent, the return on other investments 6.7n per cent, meaning that the long-term average return on investments since 1997 has been 5.8 per cent.

This corresponds to a real return of 3.9 per cent.

Solvency capital also strengthened further to €13.9bn and the solvency ratio increased to 127.5 per cent, which triggered a €140m bonus for customers.

"The year was excellent overall. With a strong investment year," Ilmarinen CEO Jouko Pölönen, stated.

"Despite the decline in employment, our premium income grew by 2 per cent and maintenance expenses decreased by 2 per cent.

"Strong solvency and improved efficiency are directly reflected in lower prices for our customers."

The group suggested that the recent pension reforms agreed in Finland could also represent an opportunity to increase equity investments further in future, explaining that higher investment returns for pension assets are being sought by increasing the opportunities for earnings-related pension institutions to take risks in investing pension assets.

"It is good that the reform makes it possible to increase the weight of stocks in the investment portfolio," Pölönen said.

"In the long term, stocks yield better returns than fixed income or real estate investments."

The group also reported on sustainability in accordance with the European Sustainability Reporting Standard (ESRS) for the first time as part of its latest annual report.

This revealed that the fund has reached its goal of a 50 per cent decrease in carbon intensity by 2030 ahead of schedule, as the carbon intensity of Ilmarinen's direct listed equity investments decreased by 62 per cent since 2020, and the carbon intensity of direct listed corporate bond investments by 51 per cent.

Ilmarinen executive vice president and chief investment officer, Mikko Mursula, said: "At the core of Ilmarinen's strategy is to invest productively, securely and responsibly.

"We have achieved a significant part of the climate goals we set ahead of schedule. Our goal is to update Ilmarinen's climate plans in 2025. At the same time, we will set new climate goals."

In total in 2024, Ilmarinen paid €7.6bn to over 450,000 pensioners, marking an increase in both the total payments (6 per cent) and in the number of pensioners (454,556)

In addition to this, a total of 41,279 new pension decisions were made, which is 12 per cent more than the previous year.

The average retirement age and the starting age for disability pensions also increased, as the average age for retirement was 65.1 years (65 in 2023) and the average age for disability pension was 52.5 years (52.3 in 2023).

The use of online services also increased by 25 per cent, as the earnings-related pension statement was viewed 763,000 times in our online service.

However, there was little change in the number of people retiring on disability pension, as 3,557 people transferred to disability pension (3,556 in 2023).

The most common reasons for disability pensions were musculoskeletal disorders (35 per cent) and mental health disorders (29 per cent).

There was also a strong link to age within this, as, for those under 55, the most common reason was mental health disorders, and for those over 55, musculoskeletal disorders.

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