Minister of Social Affairs and Health: Pension funds are well protected

Liisa Hyssälä

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Finnish pension funds have been invested in a profitable and risk-free way, announced Minister of Social Affairs and Health Liisa Hyssälä (Centre) on Monday, promising nevertheless that she intends to set up a broad-based working group to look into ”potential requirements for change” relating to the regulation and supervision of the investment of pension funds.
      Hyssälä reported at a Pension Forum yesterday that she has checked out the most recent information on the average profits on pension funds, and according to her, they complied with forecasts.
      ”At the moment we have no reasons to suspect that our pension funds would not be invested in a profitable and risk-free way”, Hyssälä confirmed.
     
Last year, investment operations of institutions for occupational retirement were somewhat liberated, meaning that the companies were allowed to take more risks in hopes of seeking a greater yield on invested capital to keep insurance premiums from rising too much, Hyssälä noted.
      Among the arguments for the working group Hyssälä mentioned rapidly changing markets, the current international financial market crisis, the planned financial supervisory agency to be set up next year, as well as improving employment. The new financial supervisory agency would combine the supervision of banks and insurance companies.
     
A good employment rate plays a significant role when it comes to pension funds, as around 75 per cent of employee pension insurance spending is covered by income-based premiums, while only a small part of the pensions that are paid out are based on return on investments.
      Another way to support employment is a specialty of the Finnish pension scheme, the so-called relending, which means that companies can borrow back the employee pension insurance contributions they have paid.
      When banks are keeping an eye on each other and keep their hands on the money, enterprises have started more and more often to regard this kind of borrow-back arrangement as a good source of funding.
      A crisis of confidence has led to high interest rates, which is why relending has again become a competitive source of funding when it comes to long-term corporate financing. It is expected to multiply this year.
     
Esa Swanljung, the Managing Director of the Finnish Pension Alliance TELA, said that increased risk-taking as a result of the 1997 and 2007 reforms has turned out to be beneficial to senior citizens. He pointed out that pension funds are invested on a long-term basis.
      ”At present we are talking of short-term risks. It has been beneficial to increase risks, as the yields on corporate shares are likely to be better in the long run than those in the old system based on bonds. Thanks to the two previous reforms, employee pension funds have almost quadrupled over some ten years”, Swanljung reported.
     
According to Minister Hyssälä, the working group will involve a broad range of representatives in order to gather all possible experiences relating to the investment of employee pension funds and to deliver updated information promptly to all parties in a rapidly changing world.


Previously in HS International Edition:
  More stock investment proposed for pension funds (31.1.2006)

Links:
  Finnish Pension Alliance TELA

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