About 7% real increase in net assets for pension payments and 52% increase in premiums

26.8.2008

A report containing information from the annual financial statements of pension funds for the year 2007 is available at the FME's webpage. There is also an excel file that contains statistical information from the report. The main results of the report are the following:

The real rate of return was 0,5% above the consumer-price index, compared with 10% in 2006. Five-year average was 9,1% and ten-year average was 5,9%.


 
The report shows that net assets for pension payments amounted to ISK 1,700 billion at year-end 2007, compared to ISK 1,500 billion at the same time in 2006. This corresponds to an annual increase of 13% or a real increase of 6,97% as measured above the consumer price index.

At year-end 2007, a total of 37 pension funds were operating in Iceland, compared to 41 at the same time the previous year. This reduction is due to merging of funds and it is believed that this development will continue. At the same time the funds have been growing and the 10 largest pension funds have about 80% of the total assets of the entire pension system.

Premiums increased between years from ISK 96,1 billion in 2006 to ISK 145,8 billion in 2007. This corresponds to an annual increase of 52%. The main reason for this enhancement is increase in required contribution to a pension fund from 10% to 12% of total wages which came into effect in the beginning of 2007. Pension paid in the year 2007 amounted to ISK 46 billion, compared to ISK 40 billion in 2006.

Private pension savings deposited with pension funds and other depositories amounted to ISK 238 billion at year-end 2007, compared to ISK 198 billion at the same time in 2006. This corresponds to an annual increase of 20%. Private pension savings in total amounted to around 14% of the total assets of the entire pension system at year-end 2007. Private pension savings premiums increased by 27% and totaled ISK 32.6 billion in 2007, compared to ISK 25.7 billion in 2006.

According to Act 129/1997 the assets of a pension fund together with the present value of future premiums shall equal the present value of estimated pension payments. All pension funds showing a deficit of 10% or higher as calculated by an annual actuarial survey must amend their Articles of Association in order to achieve a balance. Any fund showing a negative position ranging from 5%-10% for a period of 5 consecutive years must also change its Articles of Association to regain equilibrium. The only exemption from this provision is in the case of funds that are guaranteed by the state, municipal authorities or a bank. At year-end 2007 the position of 7 non-guaranteed mutual funds was negative compared to 10 funds at year-end 2006. The balance of guaranteed pension funds is similar between years and almost all of the divisions show a significant deficit.

 
About 6,1% of pension fund's investments are in non-listed securities at year-end 2007 compared to 5% at the same time in 2006. According to Act 129/1997 pension funds are authorized to invest maximum 10% of their assets in non-listed securities. Non-listed securities as defined by Article 36 are securities that do not have a registered buying and selling rate on a regulated market. Foreign currency exposures totaled 27% at year-end 2007 compared to 29% at year-end 2006.

The picture below shows the specification of the pension fund's portfolio assets as of 31.12.2007 and 31.12.2006, where it is noticeable that share holdings have reduced between years.


 
The report will only be available on FME's website.

Annual Accounts and Diverse Figures 2007
Tables from Annual Accounts 2007

For further information contact Úrsúla Ingvarsdóttir, telephone +354 525 2700, ursula@fme.is 

 

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