The TyEL payroll reported by companies insured by pension insurance company Veritas grew from the previous year by more than 6 per cent during the period of January–March. Geopolitical uncertainty pushed investment returns into negative territory at the end of the quarter.
“Veritas has grown significantly in recent years. At the same time, we have continued to develop our customer service and taken the first steps in the use of artificial intelligence, among other things. In the first quarter of the year, we succeeded in reducing the processing time for pension applications by 25 per cent compared to the corresponding period last year”, says Elina Fogelholm, CEO of Veritas.
During the second term of US President Donald Trump, the economy has moved into an era of rapid changes and uncertainty.
“Uncertainty can easily affect consumer confidence, even if the impact of the increase in oil prices caused by the Iran war is temporary and does not materialise for Finnish consumer, for example, through higher interest rates.”
The crisis is likely to strengthen investments in the defence sector and energy infrastructure throughout Europe, which will also support the outlook for Finnish companies and the development of employment.
“Finland’s economic growth depends on the growth and investments of private companies. The operating conditions of companies are supported by a predictable and sufficiently straightforward regulatory environment that encourages risk-taking and rewards success.”
The return on investments turned slightly negative
The return on Veritas’ investments was -0.3 (-0.2) per cent in the first quarter of the year. The return on fixed-income investments was -0.4 (-0.3) per cent, equity investments -0.7 (-0.6) per cent, real estate -0.2 (0.8) per cent and other investments 1.9 (0.5) per cent.
“This year started with turmoil and the return on investments turned negative. Fear of the escalation of the Iranian crisis drove the return on listed equities into the negative at the turn of the quarter. However, the investment year is just beginning and anything can happen as we move forward”, says Laura Wickström, CIO at Veritas.
According to Wickström, investors have gotten used to volatility, i.e. market fluctuations, during Trump’s second term in office.
“The beginning of the year was marked by geopolitical uncertainty and rising energy prices. If the war in the Middle East is prolonged or escalated, it can have a significant impact on economic growth and the markets.”
In April, equity markets have largely recovered from the shock caused by the war in Iran, and the return on Veritas’ investments has climbed clearly into positive territory. One of the fastest-recovering stock exchanges has been the Helsinki Stock Exchange, which has generated better returns than European stock exchanges on average.
“The earnings season has begun, and economic growth continues to look stable, especially in the United States. The rise in energy prices has weighed on European economic growth expectations in particular. Interest rates are also more likely to increase in Europe than in the United States, thereby potentially affecting consumer confidence, which is already low.”
Entrepreneurs’ pension system to be reformed
The government has reached an agreement to reform the entrepreneurs’ pension system. The system will be reformed so that, for small entrepreneurs, actual earnings will form the basis for the pension contribution. The calculated YEL income will remain an option, but it should be at least half of the actual earned income.
Fogelholm considers the reform to be a step in the right direction.
“For small entrepreneurs, the most important issue was resolved, because the reform will make their situation easier. The logic of the new model is also reasonably easy to understand from an entrepreneur’s perspective.”
The reform will enter into force no earlier than 2028, because the new model requires legislative changes and development work.
“The old legislation will remain in force until then, so it is now important to ensure that the interim period does not become too challenging.”
Appendices:
Further information:
- Elina Fogelholm, CEO, tel. +358 (0)10 550 1600, firstname.lastname@veritas.fi
- Laura Wickström, CIO, tel. +358 (0)44 209 7498, firstname.lastname@veritas.fi
The comparative figures in brackets refer to the corresponding period of the previous year.
