Strong growth in pension assets in 2024: assets worth EUR 271 bn
Earnings-related pension investments continued to grow in the last quarter of last year, during which assets appreciated around four billion euros. In total, at the end of the year, funds available for the financing of Finnish earnings-related pensions were worth a total of EUR 271 billion. These data are found in fresh statistics from TELA.
The nominal yield on earnings-related pension assets last year was 9.5 per cent. The real yield, in turn, adjusted to remove the effects of inflation on total return, was 8.7 per cent.
“The year 2024 was a good investment year for pension providers. The slower inflation rate and central banks’ interest-rate cuts supported the development of the investment markets, and almost all asset classes developed favourably,” says Mikko Mäkinen, Chief Economist at TELA, the Finnish Pension Alliance.
The best yield came from quoted stocks, first and foremost from the US market, led by tech companies.
“There were large geographical differences in equity investments. In Europe, and Finland in particular, stock market yields paled in comparison to the dynamic American economy. In these regions, improving the conditions for economic growth is important,” Mäkinen says.
Equity investments, unquoted shares, hedge funds and fixed-income investments also performed well last year. By contrast, the average real yield on property investments remained close to zero.
After the strong growth of 2024, the outlooks for this year are not as bright.
“The global situation is quite bleak right now, and the investment prospects for 2025 are particularly overshadowed by increased geopolitical tensions and an escalating trade war,” Mäkinen says.
Pension reform increases risk but also yields
At the end of January, the central labour market organizations agreed on a pension reform, on the basis of which the Ministry of Social Affairs and Health has already begun to prepare legislation. A key part of the reform is the change to the regulation and finance techniques of private-sector earnings-related pension providers’ investments. The goal is slightly better yield on investment for pension assets than at present, which would strengthen the earnings-related pension system’s finances in the long term.
“As providers pursue higher yields, the annual fluctuation in yields will probably grow. In good times, yields could be a little better than now, and in bad times, the opposite. However, when pension providers invest, they think decades into the future, so the variation in yields balances out over the long term,” Mäkinen says.
In addition, the long period means taking even small risks can provoke a compound interest effect, generating better yields for pension investments. That would be useful when there is pressure to reduce the level of pension contributions.
Mäkinen also highlights the obverse, in which earnings-related pension providers would stick to very conservative investment portfolios.
“In that case, the potential risk would be of yields remaining too low because investors don’t take enough risk. That, in turn, could lead to pressure in future to increase pension contributions,” Mäkinen says.
In addition, it is good to bear in mind that even though there are more opportunities for raising investment risk, pension assets must continue to be invested productively and prudently. What is more, pension providers must continue to hold sufficient capital to meet their pension liabilities.
More detailed information on the amount and allocation of investment assets is available in full on the Amount of pension assets page of the TELA website.
TELA will next publish statistics on pension assets, for Q1 2025, at the end of May.
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