Financing and Investments
In Finland, statutory earnings-related pensions are financed mainly by the pension contributions paid each year. However, part of the pensions are financed with funded assets and returns on funds. Employers, workers and self-employed persons pay statutory earnings-related pension contributions. Part of the earnings-related pension contributions are funded into funds governed by earnings-related pension providers. They are under obligation to invest the assets profitably and prudently and to finance an agreed share of the pension from their own fund.
The earnings-related pension is granted and paid by the earnings-related pension provider in which the worker was last insured before retiring. In the cost division carried out by the Finnish Centre for Pensions, the shares of the expenses for paid pensions that are the liabilities of the various actors are sorted out.
The earnings-related pension system’s assets increased in 2021 with 33 billion euros. Total assets at year-end were 258 billion euros.
The increase in the assets are based on the investment profits. Due to the good investment markets, the return on investments was 35 billion euros in 2021. Income was 29.1 billion euros and costs 30.9 billion euros.
Statutory earnings-related pensions are financed mainly through the pay-as-you-go (PAYG) system, that is, the earnings-related pension contributions paid in the year in question. Part of the pensions are financed under the partial funding principle by using both earnings-related pension contributions and previously accumulated funds.
Statistics on earnings-related financing
The pension assets of the earnings-related pension scheme grew in 2019 by 22 billion euros, amounting to 218 billion euros at year-end. Due to a good investment year, the return on investments amounted to 24.1 billion euros. Pensions paid amounted to 28.8 billion euros and collected earnings-related contributions to 23.0 billion euros. The figures will be specified in June when the financial statements of all pension providers are compiled.