FINLAND - The Finnish government has proposed extending emergency legislation, designed to reinforce the solvency position of pension funds, for a further two years.

In a Bill presented to parliament today by the president of the republic, it is proposed that the temporary act - instituted in December 2008 until December 2010 - should remain in place until the end of 2012. It is expected the change would come into force this spring.

The solvency measures introduced in 2008 covered a number of areas within the solvency framework, and allowed pension institutions to access certain excess buffers to improve their solvency level as well as avoid the need to sell-off equities in such a poor market. (See earlier IPE article: Finnish funds prepare for relaxed solvency rules)

In a statement, the government said the new Bill “reinforces the solvency of the authorised pension institutions in the private sector so that the pension institutions can pursue efficient financial activities that implement long-term goals in the current unstable market situation”.



However, it confirmed another reason behind the extension was to provide a sufficient transition period to implement “permanent revisions” to the solvency regulations for private sector pension institutions. These regulations are currently under review, and the Ministry of Social Affairs and Health has appointed two working groups to examine the necessary changes.



The government added: “If the temporary act expired at the end of 2010, it would weaken the solvency of the authorised pension institutions and reduce their ability to retain more risky investments with higher expectations for return.”

It argued a poorer price development for shares and other investments would “potentially lead to reductions in the asset beta, even before the temporary Act expires at the end of 2010. In practice, this would mean that pensions institutions would be selling shares in particular, including those of Finnish listed companies”.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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