The Pension System of Iceland, recognized as the best in the world recently, faced problems due to excess funds. So much money has accumulated in it that they have nowhere to invest, writes writes Bloomberg.
In the assets of Icelandic pension funds, two times more than in the country’s economy, therefore the government considers the opportunity to acquire more securities in foreign stock markets. According to the current legislation, the proportion of foreign holdings in the assets of Icelandic pension funds cannot exceed 50 percent. Minister of Finance of Iceland Bjarni Benedictson said that the pension savings of citizens constitute 6.4 trillion kroons ($ 49 billion). “Of course, we cannot limit all investment opportunities internal market,” the minister said.
In 2020, Iceland’s pension funds increased its assets in foreign markets up to 35 percent – by 11 percent more than in 2010. Some funds approached internal limits for foreign investments and were forced to stop investing. In this regard, the Icelandic Association of Pension Funds offered to completely cancel the investment limit or increase it from 50 to 60-65 percent. “We need to listen to the wishes of funds to have more freedom of action for foreign investment, thinking through every step,” Asgeyr Jonsson said the head of Central Bank. Soon he will express an opinion on this issue.
Head of the Regulator said that any increase in foreign investment of pension funds should be gradual and comply with the development of the internal economy. Too sharp change can lead to destabilization of the crown, warns Jonsson. Last year, the Central Bank concluded an agreement with pension funds to suspend foreign investment for six months in the midst of a pandemic to protect the crown course from fluctuations.
At the end of October, the pension system of Iceland was recognized as the world’s best in the world according to the Mercer CFA Institute. Following the Netherlands and Denmark. Last place in the list of 43 countries took Thailand. In Iceland, the lowest level of poverty among citizens over 66 years old – 2.8 percent. For comparison: in the US, this indicator is 23.1 percent, in China – 39 percent.