Keva, which is responsible for funding local government pensions and investing pension funds, recorded a 4.8% return on investments in 2015.
At year-end 2015, the pension liability fund amounted to €44.9 billion (€42.3 billion at year-end 2014). Contribution income under the local government pensions system amounted €5.0 billion and pension expenditure to €4.5 billion
Since the start of 2013, Keva has also collected state pension contributions. During 2015, contribution income under the state pension system amounted to around €1.7 billion. State pension contributions have no material impact on Keva’s financial statements since the contributions are transferred to the State Pension Fund.
According to Keva’s Acting CEO, Tapani Hellstén, Keva’s investments yielded a good return under the circumstances.
“Keva’s contribution income from main cash flows and pension expenditure developed as forecast last year. Pension processing efficiency was at an excellent level. Also our investments gave a fairly good return given the restlessness of the markets,” Hellstén reports.
Reasonable return on investments
In 2015 Keva’s total investment return at market value after expenses was 4.8% (8.7% in 2014). The capital-weighted, cumulative real return on investments since funding started in 1988 until year-end 2015 was 4.0% per annum. The cumulative real return on investments excluding capital weighting over the same period was 5.3%. In the Finnish pension sector, long-term returns are usually calculated excluding capital weighting. The five-year real return excluding capital weighting has been 4.8% and the ten-year return 3.5%.
Of the different asset classes, the best result was generated by private equity investments (19.2%), listed equities and equity funds (8.7%) and real estate investments (8.1%). Fixed-interest investments generated 0.4% and hedge and commodity investments returned a loss of 1.2%.
At year-end 2015, the market value at risk of Keva’s investments totalled €44.2 billion. Fixed-income investments (including the impact of derivatives) accounted for 44.4%, listed equities for 36.2%, real estate for 6.7%, private equity investments for 6.1% and hedge and commodities investments for 6.6% of the market value.
Moderate growth in local government contribution income
At year-end 2015, some 522,000 employees, about the same number as a year earlier, were insured under the Local Government Pensions Act (KuEL). The local government payroll totalled €16.8 billion, which is 0.9% more than in 2014.
Local government contribution income rose 0.9% year on year and amounted to around €5.0 billion (€5.0 billion in 2014). Local government contribution income is made up of the employer’s and employee’s pay-based contributions, as well as of the employer’s contributions based on pension expenditure and early retirement expenditure.
The value of the benefits that have accrued, which have not yet been paid out, in the local government pension system considerably exceeds the value of the pension liability fund. At year-end 2015, the value of these accrued benefits was estimated to have been around €105 billion, an increase of around €3 billion compared to year-end 2014.
Over €4 billion paid out in state pensions
At year-end 2015, just under 150,000 people were insured under the State Employees’ Pensions Act (VaEL). Keva paid out €4.4 billion in state pensions during the year, an increase of 2% on the previous year.
At year-end 2015, around 18,000 people were insured under the Evangelical-Lutheran Church Pensions Act (KiEL) Pension expenditure of the Evangelical-Lutheran Church amounted to around €180 million. Staff pension expenditure for employees of the Social Insurance Institution Kela amounted to around €93 million.
Each pension system is responsible for its own pension financing and for the investment of its funds. Keva is responsible for the funding of local government pensions and investing pension assets as well as for executing earnings-related pension matters within the entire public sector.
Keva has been statutorily in charge of implementing the state pension system for employee customers since the beginning of 2011, and for implementing the Evangelical Lutheran Church’s and Social Insurance Institution of Finland’s pension system since the beginning of 2012.
Since the start of 2013, Keva has handled the statutory tasks related to the state pension insurance matters of state employers and the contract-based collection of the Evangelical Lutheran Church’s pension contributions.
Keva does not publish a printed annual report. Our financial statements and annual reports are published on our website at www.keva.fi. The Report of the Board of Directors and Financial Statements will be available on our website in Finnish as of 9 March 2016, after being reviewed and approved by Keva’s Council.
The interim report for the first quarter of 2016 will be published during week 17.
For further information, please contact:
Tapani Hellstén, Acting CEO, tel. +358 20 614 2204
Ari Huotari, CIO, tel. +358 20 614 2205
Tom Kåla, CFO, tel. +358 20 614 2211
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