- Many of the upcoming government’s measures will be a welcome boost to ownership and wealth creation in Finland. A good example is the children’s savings account proposed in the programme.
- The financial sector’s growth strategy outlined in the programme will require a reform of existing fund regulation.
- Boosting voluntary pension saving is supportable – focus should be especially on lowering the age at which private pension savings can be withdrawn, which currently stands at 68–70 years.
- A reform of the pension system is also welcome, but there is no need to concentrate self-employed persons’ contributions (YEL) to Mela, the Farmers’ Social Institution of Finland.
A sustainable welfare state is built on responsible economic management and a tax policy that encourages work, entrepreneurship and domestic ownership. The government programme of Petteri Orpo’s coalition includes many elements aimed at speeding up economic growth and employment. We are glad that the upcoming government is planning to launch a financial sector growth strategy that also involves the comprehensive assessment of financial market regulation, says Finance Finland’s CEO Arno Ahosniemi.
“The cornerstone of responsible, sustainable economic management is the promotion of ownership and wealth creation. In practice, this means encouraging everyone to save and invest for rainy days. It is splendid that the government is planning to implement new measures to boost this. Personal savings provide security for citizens and also improve society’s carrying capacity”, Ahosniemi points out.
Ahosniemi commends the upcoming government for its bold decision to include a children’s savings account with the Finnish maternity package. Finance Finland has proposed that the state should gift every new-born child who is a permanent resident in Finland with a pre-determined sum, for example 300 euros, to be invested in an equity savings account, investment fund or investment insurance.
“A child’s own savings account would make saving and investing a familiar routine for children and their families. It is important, however, for the maternity package to also allow saving in funds and investment insurance. After all, a key aspect of market economy is that different ways to invest are on offer equally. It is good to see that the popularity of equity savings accounts has grown alongside the other forms of investment and that their deposit limit will now be doubled”, Ahosniemi emphasises.
The creation of a growth strategy for the Finnish financial sector, as promised in the government programme, is an excellent move forward. As part of the strategy, a reform of the current fund regulation should also be launched immediately. Finnish law should enable the establishment of variable-capital investment companies (also called SICAV funds), which are already a standard structure especially in Central Europe. To ensure the best outcome, the changes must be drafted in a joint working group including both authorities and sector representatives.
“Funds are a cross-border business. It is increasingly common for their management to be centralised in one country, from which they are marketed to consumers in other countries. Small differences in regulation not only determine where funds are located, but also which funds are favoured by investors. Finnish funds bring tax income, jobs and skilled workforce to Finland”, highlights Ahosniemi.
Revitalisation of voluntary pension saving is highly welcome
Ahosniemi points out that the importance of private wealth creation does not diminish with age. He considers it a good thing that the next government is prepared to relax the conditions of voluntary pension insurance and to review whether the minimum age limit of withdrawals is appropriate.
Under the current regulation, savers may not withdraw their personal savings until the age of 68–70, regardless of when they retire. This policy has caused a slump in voluntary pension saving.
“Hopefully the new measures will revitalise the sales of voluntary pension insurance. Pension insurance and long-term savings contracts are valuable supplements to the statutory pension scheme. During the peak years, 700,000 Finns made savings in these products, but because of the age limit, new business in the policies has since dried up”, Ahosniemi says.
Pension reform necessary to guarantee the sustainability of pension financing – no need to centralise self-employed persons’ pension contributions to Mela
As the representative of private employee pension insurers, Finance Finland considers it necessary that the long-term sustainability of pension financing is guaranteed without endangering the adequacy of pension coverage.
Ahosniemi mentions that Finance Finland’s experts are ready to offer their expertise in earnings-related pensions and the investment market to support this valuable work. However, Finance Finland considers it unnecessary to undertake the centralisation of the self-employed persons’ pension scheme and its contributions under the management of Mela, the Farmers’ Social Institution of Finland. The Self-employed Persons’ Pensions Act was only recently amended at the end of 2022.
The government programme also states that owing to the declining dependency ratio and uncertainty related to the economic trend, returns on pension fund asset investments and future growth in contributions, necessary amendments to earnings-related pension legislation will be prepared on a tripartite basis in order to ensure financial sustainability and safeguard an adequate level of benefits.
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