According to the Finnish Centre for Pensions’ annual investment comparison, 24 pension investors from nine different countries achieved an average nominal return of 9.5 per cent after expenses last year. The average real return was 8 per cent. 

“Despite the recent trade wars that have shaken global stock markets, many pension investors have actually had an exceptionally good investment year. Last year’s return was well above long-term figures,” says Liaison Manager Mika Vidlund. 

The impact of inflation on pension investors’ real returns is significant. 

“Although inflation has fallen in many countries, it has affected the results of the performance comparison in different ways. For example, inflation in the Netherlands was much higher than in Finland. As a result, Dutch investors lagged significantly behind Finnish investors in terms of real returns, even though nominal returns are very similar”. 

Finnish pension investors strong in regulated investor category 

Finnish pension investors put in an impressive performance last year. In the category of regulated investors, Finnish pension investors took all the top spots. Varma, a Finnish pension fund, achieved the highest real return of more than 9 per cent. Ilmarinen, Elo and Veritas followed closely with real returns of just under 8 per cent. 

Behind the Finnish pension investors were the Swedish occupational pension managers AMF and Alecta and the Danish funds IP and ATP. 

Graph’s “Real return of earnings-related pension investors in 2024, %” data in accessible Excel file.

An important reason for the strong performance of Finnish pension investors appears to be the increased allocation to foreign equities in their portfolios. According to the Finnish Centre for Pensions, Finnish pension investors reduced the share of domestic stocks last year. 

“Investing abroad paid off last year as the Helsinki Stock Exchange underperformed other markets,” says Special Adviser Antti Mielonen. 

Among unregulated pension investors, Norway’s SPU buffer fund achieved the highest real return of 20 per cent. 

“SPU’s return was mainly generated by equities, especially US technology companies. In addition, the continued depreciation of the Norwegian krone provided SPU with additional gains”, Mielonen adds. 

South Korea’s statutory pension fund secured second place with a real return of almost 13 per cent. Among Finnish investors not subject to regulatory constraints, Keva returned 9.6 per cent and VER 8.2 per cent. 

”Keva’s return was so strong that even Swedish buffer funds could not match it.” 

Long-term real returns of 4-5 per cent 

A long-term perspective smooths out the annual fluctuations in investment returns. Over a ten-year period (2015–2024), the average real return for pension investors is around 4 per cent. Over a fifteen-year period (2010–2024), the average real return rises to 5 per cent. 

Among Finnish investors, the highest long-term real returns are achieved by the Seafarers’ Pension Fund (MEK), Keva and the Church Pension Fund (KER). The Seafarers’ Pension Fund has an average annual real return of 4.8 per cent over 15 years. The Church Pension Fund and Keva both have a real return of 4.4 per cent. 

Graph’s “Real return of long-term earnings-related pension investors 2010-2024, %” data in accessible Excel file.

Finnish investment opportunities improve 

Investment opportunities for Finnish private sector pension funds could become more yield- and risk-oriented in the coming years as their investment rules are updated. The new investment reform, agreed in January, means that private sector pension investors can allocate up to 85 per cent of their portfolio to equities. 

Mika Vidlund of the Finnish Centre for Pensions says that such a high proportion of equities is unusually high by international standards. 

“For example, Norway’s SPU can allocate a maximum of 72 per cent to equities. On the other hand, a high limit can help avoid the need to sell equities if their value rises sharply”. 

Currently, Finnish private pension investors can allocate a maximum of 65 per cent of their portfolio to equities. A higher allocation to equities requires the investor to have a higher solvency capital.  

At the turn of the year, just over half of Finnish pension investments were in equities. Most Finnish pension investors had just over a fifth of their allocation in bonds.

Graph’s “Allocation of earnings-related pension investors’ investments in 2024, %” data in accessible Excel file.

Read more: 

• International investment return comparison (Etk.fi) 
• Investments of the earnings-related pension system (Etk.fi)