Regulation of investment activities
Authorized pension providers take a certain share of pension contributions for funds and investment. Investment activities are regulated both by legislation and by the operators’ own principles pertaining to investments.
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The law requires profitability and security
By law, pension assets must be invested profitably and securely. The obligation is phrased slightly differently in legal acts concerning various pension providers, but the main rule is the same for everyone.
Security requires that investments are diversified among categories with differing risks. In addition, investments must be diversified geographically, among various countries and continents. Not all pension assets can therefore be invested only in Finland.
The aim is to gain as good a return on the investments as possible, in proportion to the risk. Private-sector pension providers are subject to solvency regulation that limits the risk they take in their investment activities.
In the public sector, investment activities are guided by decisions made by the decision-making bodies of pension providers.
Activities guided by operators’ own recommendations and principles
Apart from legislation, the activities of earnings-related pension providers are steered by each operator’s own principles and investment strategies.
Each earnings-related pension provider defines its own investment and ownership policy independently.
All pension providers also have their own procedures and principles for assessing and reviewing the responsibility of investments. Responsible investment is an important element of pension providers’ investments, and it is each operator’s responsibility to define the associated policies.
Independent decision-making at the Board’s responsibility
All authorized pension providers make their investment decisions independently. The Board of Directors of each pension provider is ultimately responsible for the investment decisions made.
The Board decides on the plan concerning the investment of pension assets, i.e. the investment plan. The Board sets the overarching principles for investment activities. The investment plan describes, for instance, the categories in which investments are made and what the return targets are. In addition, the plan assesses the risks associated with investments.
Each authorized pension provider has a different investment plan. When drawing up investment plans, attention is paid to the legislation on authorized pension providers. Private-sector pension providers must also take into account the guidelines issued by the Financial Supervisory Authority on the content of the plan.