Return on investments of the State Pension Fund of Finland -6.8% in 2022; ten-year average return 5.3%

Press release 28 February 2023

The market value weighted return on the investments by the State Pension Fund of Finland (VER) reached -6.8 per cent in 2022 (14.6 per cent in 2021). The real rate of return was -14.6 per cent (10.8 per cent in 2021). 

VER primarily seeks a long-term return sufficient to finance the state pension system. VER’s average nominal rate of return over the past ten years is 5.3 per cent and real return 3.4 per cent. The average nominal five-year return is 4.1 per cent and real return 1.1 per cent.

At the end of 2022, the market value of VER’s assets amounted to EUR 21.6 billion (EUR 23.6 billion in 2021). Of all the investments, fixed income instruments accounted for 40.7 per cent, equities 47.6 per cent and other investments 12.9 per cent of the total. The rest of the risk-adjusted allocation consisted of the impact of derivatives.

VER’s two large asset classes, liquid fixed income investments and listed equities, gave negative returns in 2022. The return on liquid fixed income instruments was -8.2 per cent and that of listed equities -12.4 per cent. Of the other asset classes, the best performance was put in by infrastructure funds at 15.6 per cent and private equity funds at 12.5 per cent.

“The investment market was challenging in 2022. Geopolitics, volatility in energy markets and rising inflation created many new uncertainties in the investment markets,” says CEO Timo Löyttyniemi.

“Increased interest rates led to negative returns on risk-free government bonds at the same time as the returns on equity investments turned negative. Usually, the returns on these two asset classes have offered mutual protection. Even so, VER's long-term returns have remained at a sound level,” Löyttyniemi says.

“The Act on the State Pension Fund was amended in 2022 after VER reached its 25 per cent funding ratio target at the end of 2021. VER’s net contributions to the government budget will increase in the future as a result of the legal amendment and rising pension expenditure. These factors will limit the fund's growth in the coming years and create new investment challenges," says Löyttyniemi.

In 2022, VER received approximately EUR 1.6 billion in pension contribution income and transferred some EUR 2.0 billion to the government budget. In 2023, VER is required to contribute an amount equivalent to 40 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 2022, the pension liabilities under the state pension system amounted to EUR 97.0 billion. The funding ratio was 22.4 per cent. The Financial Statements will be confirmed by the Ministry of Finance in April 2023.

The Annual Report of the State Pension Fund of Finland is available here.

Additional information: VER’s CEO Timo Löyttyniemi, firstname.lastname@ver.fi, tel.: +358 (0)295 201 210.

Established in 1990, the State Pension Fund (VER) is an off-budget fund through which the State prepares to finance future pensions and equalise pension expenditure. VER is an investment organisation responsible for investing the State’s pension assets professionally. At the end of 2022, the market value of the Fund’s investment portfolio stood at EUR 21.6 billion.