Slight decrease in pension assets in Q1 amid market uncertainty
Q1 of this year showed the importance of diversifying pension asset investments both geographically and by asset class, as the strong performance of the US stock markets dried up. The amount of employment-related pension assets fell by about one billion euro during Q1 2025, totalling EUR 270 bn at the end of March.
“In 2025, the stock markets opened in a positive tailwind, following the very good investment year that was 2024. However, intensified geopolitical and trade tensions chilled market moods during the quarter. In particular, the US government’s trade policies unnerved the markets. Key stock market indexes went from highs at the start of the year downwards as we approached the end of March,” says Mikko Mäkinen, Chief Economist at TELA.
The nominal return on earnings-related pension assets at the start of the year was -0.3 per cent. The real return, adjusted to remove the effects of inflation on total return, was -0.8 per cent.
“During Q1, stock market performance in the US was – unusually – worse than in Europe. The performance of European markets compensated for the American share markets’ sluggishness. As a whole, the yield on earnings-related pension providers’ equity investments was slightly negative during the first quarter,” Mäkinen says.
“The ECB continued cutting interest rates as inflation slowed. In the US, the Fed kept its current key rate, but market rates decreased as fears of a recession grew. The pension providers’ fixed-income investments performed better than equity investments during Q1. Among asset classes, the best performers in an uncertain environment were property investments and alternative investments,” Mäkinen says.
The investment market uncertainty continued after the end of Q1.
“The stock markets have seen exceptionally large day-on-day shifts, both up and down. Earnings-related pension providers’ investment horizon is usually over several decades, allowing the system to survive short-term fluctuations. In addition, the pension providers have excellent solvency, helping them shield the impact of stock price drops on pension assets,” Mäkinen says.
New pension reform legislation being drafted
The legislative amendments negotiated by labour-market organizations in January, pursuant to the pension reform agreement, are currently being drafted by a working group subordinate to the Ministry of Social Affairs and Health.
“For example, reforming the regulation of how pension providers invest their money involves a lot of details, which the ministerial working group is currently investigating. Many technical issues and the related impact assessments will also be teased out as the group does its work,” Mäkinen says.
During the spring, there has been some public speculation about the possible impacts of a new investment regime on pension providers’ investments.
“I get why some people are speculating, but you have to remember the drafting process is still under way. As part of that drafting process, one of the areas where an impact assessment will be done is the property market, and that assessment will be reflected in the Bill the working group produces,” Mäkinen says.
Mäkinen does not believe that the recent events on the stock markets will prove a barrier to the investment regime overhaul.
“In particular, the new investment regime will aim at increasing equity investments, where we often see very volatile fluctuations. However, finance theory and historical time series of asset classes’ returns show that equity investments perform best over the long term,” Mäkinen says.
Details on pension asset amounts
The amount of the pension providers’ investable earnings-related pension assets at the end of March 2025 totalled EUR 270 billion. The assets declined by one billion euro during the first quarter.
During the first quarter, the nominal return was -0.3% and the inflation-adjusted real return was -0.8%. The long-term real return, since 1997, was 3.9%. The real returns by investment class in Q1 were:
- equity and equity-type investments -1.3%
- fixed-interest investments -0.2%
- property investments 0.0%
- alternative investments 0.1%.
There were no significant changes to the breakdown in assets by class or geographical region during the quarter.
The figures for earning-related pension assets compiled by TELA pertain to the pension assets managed by pension providers, pension funds, pension foundations, the Pension Fund for the Employees of KELA, KEVA, the Church Pension Fund, the Farmers’ Social Insurance Institution, the Seafarers’ Pension Fund, the Bank of Finland’s Pension Fund, and the State Pension Fund of Finland. Only statutory pension coverage is included in the statistics.
The pension assets for which TELA compiles statistics do not contain other receivables and debts or tangible assets recognized in the balance sheet. The earnings-related pension assets listed here refer to investable assets.
More detailed information on the amount and allocation of investment assets is available in full on the Amount of pension assets page of the TELA website. You can also browse data on the TELA statistical data base.
TELA will next publish statistics on pension assets, for Q2 2025, in August–September.
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