Favourable development on the global equity markets has brought pension investors strong returns since the start of the year. The clear slowing of inflation and fall in interest rates have strengthened the return on fixed income investments. There was strong movement in equity valuations at the end of summer.
In January–September, Varma’s investments returned 7.7 (2.8*) per cent, i.e. EUR 4.6 billion. The value of Varma’s investments was EUR 63.2 (59.1 on 1 Jan) billion.
“2024 has been a good year for pension investors. The sentiment has been very different than it generally is in the Finnish economy. The fall in interest rates that started in summer will ease the situation for households, but unfortunately similar relief for industry is not yet in sight,” says President and CEO Risto Murto.
In the third quarter of the year, all of Varma’s investment asset classes yielded positive returns. With the fall in interest rates, the return on fixed income investments spiked.
Year to date, equity investments have performed the best, at 11.2 (4.1) per cent. The return on fixed income investments in January–September was 4.7 (1.5) per cent, on private equity investments 4.4 (6.7) per cent, on real estate investments -2.1 (-2.6) per cent and on hedge funds 6.7 (5.0) per cent.
“Inflation is starting to near the target level, which has turned the central banks’ concern towards whether or not the economic growth will continue. Economic growth is driven by the USA, which is still showing no signs of slowing down. Demand for workforce has calmed, but unemployment has not increased,” says Varma’s Chief Investment Officer Markus Aho.
“Geopolitical risks are especially high, but the markets have become desensitised and are not reacting very strongly to the conflicts and attacks. There has, however, been some restlessness on the markets that has caused an increase in share price fluctuations,” he points out.
Varma’s solvency ratio at the end of September was EUR 133.6 (130.4 on 1 Jan) per cent, and solvency capital was at a secure level, i.e. 1.7 times (1.6 on 1 Jan) the solvency limit.
Varma assessed how prepared its investees are to prevent biodiversity loss
Varma for the second time now looked into how prepared its investees are to consider biodiversity in their operations. Of the companies surveyed, 39 per cent had set targets for addressing the prevention of biodiversity loss in their operations, but only 9 per cent had a concrete action plan in place. The survey included 318 companies from sectors exposed to biodiversity loss.
The TyEL payroll of Varma’s client companies grew 2.6 per cent in January–September compared to a year ago. Payroll growth picked up again in the third quarter, after experiencing a lull in the second quarter.
Partial old-age pension applications nearly doubled
Varma received a large number of applications for partial old-age pension. The number of applications nearly doubled compared to the corresponding period last year. This type of pension was granted to roughly 4,600 applicants. By mid-September, Varma had already received as many applications as in all of last year.
Next year, not a single new age cohort will reach the lower age limit for partial old-age pension, as the age limit for those born in 1964 is 62. Until now, people could apply for partial old-age pension at the age of 61.
The number of new disability pension applications arriving at Varma increased by 7.3 per cent since last year. Compared to previous years, anxiety disorders, adult ADHD, and autism spectrum disorders were highlighted in applications based on mental health grounds as diseases that reduce work ability.
One fifth of the reviewed YEL incomes at the correct level
This year, Varma is reviewing the YEL income of entrepreneurs whose income is between EUR 15,000 and 25,000. The income of some 7,000 entrepreneurs is scheduled for a review. The YEL income of 19 per cent of those entrepreneurs was already at the correct level. So far, the average increase in YEL income following the reviews was EUR 3,879. The right level of YEL income strengthens both an entrepreneur’s pension accrual and their social security. Earnings-related pension insurance companies must review the YEL income of entrepreneurs every three years.
Varma gained a total of EUR 170 (159) million in new premiums written during January–September. That includes the net amount of TyEL insurance premiums written transferred from other earnings-related pension companies and sales of pension insurance to new customers.
Varma Mutual Pension Insurance Company is a responsible and solvent investor of pension funds. The company is responsible for the statutory earnings-related pension cover of 981,000 people in the private sector. Premiums written totalled EUR 6.5 billion in 2023 and pension payments stood at EUR 7.1 billion. Varma’s investment portfolio amounted to EUR 63.2 billion at the end of September 2024.
*The comparison figures in parentheses are from 30 September 2023 unless otherwise indicated.
Additional information:
- Hanna Kaskela, Senior Vice President, Sustainability & Communications, tel. +358 40 584 5045 or hanna.kaskela(at)varma.fi
- Marjut Tervola, Communications Manager, tel. +358 45 673 0120 or marjut.tervola(at)varma.fi