State Pension Fund earns 0.9 per cent return on investments

The return on the investments made by the State Pension Fund (VER) reached 0.9 per cent during 1 January–30 June 2016. The return for the second quarter was 1.8 per cent.

VER’s average rate of return is 5.8 per cent for the past five years and 4.6 per cent for the past 10 years, while the equivalent real return is 4.7 per cent (5 years) and 2.9 per cent (10 years).

Of the main asset classes, liquid fixed-income instruments returned 3.7 per cent and listed equities -2.4 per cent during the first half of the year.

At the end of June, the market value of the Fund’s assets amounted to EUR 17.9 billion (EUR 17.9 billion on 31 December 2015). At the end of June, fixed-income instruments accounted for 47.5 per cent, equities for 43.2 per cent and other investments for 8.2 per cent all VER’s investments.

“The return on investments was barely in the black, mainly due to the fixed-income instruments. The investments in the emerging markets, in particular, generated healthy returns,” says CEO Timo Viherkenttä.

“The stock markets had not fully recovered by June from the sharp fall experienced in early winter and the new blow delivered by the EU referendum in the UK. Subsequently, share prices have exceeded the year-start levels in many markets.”

“The historically low interest rates and record-high U.S. stock prices give reason to prepare for modest returns as well as setbacks in the future,” says Viherkenttä.

During the first half of 2016, VER earned a total of EUR 763 million in premium income. By the end of June, the State Pension Fund had transferred a total of EUR 892 million to the government budget. Under the law, VER is required to contribute to the government’s annual budget an amount equivalent to 40 per cent of the state’s total pension expenditure. The amounts to be transferred increase continuously with the growth in pension expenditure.

Relatively speaking, the state’s pension liabilities have been pre-funded to a lesser extent than in the private and municipal sector. At the end of 2015, the state’s pension liabilities amounted to EUR 95.7 billion, while the funding ratio was 19 per cent. Under the law, the State Pension Fund will be grown until its assets cover 25 per cent of the state’s pension liabilities.

Further information:

Inquiries: CEO Timo Viherkenttä tel.: +358 9 2515 7010.

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 June 2016, the market value of the Fund’s investment portfolio stood at EUR 17.9 billion.

All the figures presented in this press release are preliminary and unaudited.