Keva, which is responsible for the funding of local government pensions and the investment of pension assets, recorded a 7.7% return on investments, i.e. around EUR 3.7 billion, for 2017.
The market value of Keva’s investments at year-end 2017 totalled EUR 51.9 billion (EUR 48.5 billion in 2016). Contribution income under the local government pension system was EUR 4.8 billion and EUR 5.0 billion was paid out in pensions. This was the first time that contribution income received by Keva was lower than the amount of pensions paid out. This difference will grow quite quickly in coming years.
”Keva’s earnings last year were good: investment performance remained at a good level and among the leaders in the sector. Keva also made good progress with its reform projects,” reports CEO Timo Kietäväinen.
“For Keva, 2017 was a year of changes,” says Kietäväinen. The pension reform entering into force at the start of the year went well from our perspective and pension application processing times continued to be among the fastest in the sector. We made effective progress with our change projects and in introducing digital services,” Kietäväinen adds.
After costs, Keva’s total return on investments at market value was 7.7% in 2017 (7.4% in 2016). The capital-weighted real return since funding started in 1988 to year-end 2017 was 4.3% per annum. The cumulative average real return, excluding capital weighting, over the same period was 5.5%. In the Finnish pension sector, long-term returns are normally calculated without capital weighting. The five-year real return without capital weighting has been 6.5% and the ten-year return 3.8%.
Chief Investment Officer Ari Huotari considers Keva’s investment performance to be satisfactory. “Our investment performance both for 2017 and for a pension investor for significantly longer periods is good, especially taking into account our moderate risk level. In our investment operations, we are also prepared to face up to capital market development not continuing to be as rosy as we have become accustomed to since the financial crisis,” Huotari says.
Regarding asset classes, the top performers were listed equities (14.5%) and equity funds (12.7%). Also real estate investments (7.9%) and hedge funds (5.7%) provided good returns. Fixed income investments provided a satisfactory return (1.8%).
The market value of Keva’s investments at year-end 2017 totalled EUR 51.9 billion. Fixed income investments (including the impact of derivatives) accounted for 41.9%, listed equities for 38.5%, real estate for 6.3%, equity funds for 7.1% and hedge fund investments for 6.3% of the market value.
Local government contribution income declined
At year-end 2017, there were around 515,000 people insured (519,000 in 2016) under the pension system of Keva’s member organisations. The payroll was EUR 16.8 billion (EUR 16.9 billion in 2016).
Contribution income from member organisations was down 3.5% year on year and amounted to around EUR 4.79 billion in 2017 (EUR 4.97 billion in 2016).
EUR 4.6 billion on State pensions
At year-end 2017, there were around 135,000 people insured under State pension cover. During the year, Keva paid out State pensions amounting to EUR 4.6 billion, a rise of 2% compared to the previous year.
At year-end 2017, there were around 18,000 people insured under Church pension cover. Evangelical-Lutheran Church pension expenditure amounted to around EUR 196 million. Pension expenditure for Kela’s salaried employees amounted to around EUR 99 million.
Each pension system is responsible for its own funding and fund investment operations. Keva is responsible for financing local government pensions and investing pension funds, and for implementing pension matters for the entire public sector.
Keva has been statutorily in charge of implementing the State’s pension system for private 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 since the start of 2017.
Keva does not publish a printed version of the annual report. Financial and annual reports are published on our website in the Financial information. The Report of the Board of Directors and the financial statements will be posted on our website on 7 March 2018 after consideration and adoption by Keva’s Council.
The interim report for Q1/2018 will be published during week 17.
For further information, please contact:
Timo Kietäväinen, CEO, tel. +358 20 614 2201
Ari Huotari, CIO, tel. +358 20 614 2205
Tom Kåla, CFO, tel. +358 20 614 2211