Early retirement costs in Finland could become unmanageable as an unintended consequence of major local government reform, according to Finnish public sector pension fund Keva.

Releasing its first quarter results, Finland’s largest pension fund warned that steps needed to be taken by government to make sure current employees continued working.

The €51.2bn fund said it was preparing for the health, social services and regional government reform taking place in Finland, and was concerned about the position of employees in relation to the overhaul.

Keva’s chief executive Timo Kietäväinen said: “The work capacity of employees needs to be maintained at all levels to ensure that costs arising from premature retirement do not spiral out of control.”

The widescale reform will establish 18 new counties in Finland, as well as shift responsibility for the provision of services to new healthcare regions and away from more than 300 local governments.

“Now there is every reason to take up the challenge brought about by the health and social services reform in earnest,” Kietäväinen said.

If this did not happen, there was a risk that progress already made on extending working life in the public sector would come to a halt, he warned.

‘Reasonable’ first-quarter loss

In its first quarter results Keva reported a 0.4% investment loss for the period, which it said reflected stock market uncertainty.

At the end of March, total investments were worth €51.2bn, down from €53.1bn at the end of December.

Kietäväinen said the investment performance was reasonable given the challenging market environment.

Among asset classes, the top performer for Keva in the first quarter was private equity funds, which generated a 2.2% return, followed by hedge funds with a return of 1.1%.

Property produced a 0.9% return and fixed-income investments returned 0.6%.

Listed equities and equity funds, however, made a 2.5% loss in the period.

At the end of March, fixed income accounted for 42.1% of Keva’s portfolio, while listed equities and equity funds made up 37.7%.

Private equity, hedge funds and real estate had allocations of 7.6%, 6.4% and 6.2% respectively.

The pension fund runs pensions for local government and state employees, for the Evangelical Lutheran Church and staff of social insurance institution Kela.

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