| Private pensions in Finland |
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| 10/02/2008 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Pension insurance companies are central players in Finland's private pension system. While companies can have their own schemes, they increasingly outsource the management of their pension assets to insurance companies (see related article). Pension insurance companies' high solvency buffers (above 30%) allow them to allocate larger portions of their portfolios to higher return assets such as equities, insuring more stable annual contributions compared to stand-alone schemes. "Forty years ago private pension schemes were a majority. They are now a minority," says Jussi Laitinen, CIO at Ilmarinen. "If we invest better than the average pension company, we can give part of our returns as a rebate toward contributions."
About 90% of private pension assets are held by insurance companies. Investment guidelines require pension funds to meet a minimum solvency capital level before they can invest in riskier assets. While the trend until a few years ago was to follow more conservative allocations in bonds, reforms have since increased the equity limit to 35% from 25%; however, if a pension scheme manages to have its solvency capital at a high level (Ilmarinen's, for example, was 32% at the end of 2007), equity allocations can exceed the 35% target. VB and CM |
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Articles of the same Topic : Pension funds Scandinavia |
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