A word from the CEO
Solid reserves useful in turbulent financial markets
2022 was a year of deep seriousness and great contrasts. At the beginning of the year, we were still shaking off the last restrictions brought on by the coronavirus pandemic. At the same time, dark clouds were gathering in the shape of warnings of a possible Russian invasion of Ukraine. Unfortunately, on February 24, these warnings became reality, and we have since had war in Europe with all of the brutality and suffering that it brings.
Although the human consequences of the pandemic and of the Russian bombs overshadow everything else, there is no doubt that both have also affected the financial markets in a number of ways. We have seen a supply crisis, falling equity markets and high inflation, particularly in energy prices. To stop inflation, central banks have raised interest rates rapidly and substantially. This market turbulence is reflected in KLP’s results in the form of a return on customer funds of minus 1.1 per cent last year.
Although this was a much rougher year than we could have imagined, it was also an effective test of how well equipped KLP is to withstand such turbulence in the financial markets. Solid buffers and investments spread across the world have once again proved to be a strength in difficult times. Higher interest rates also benefit a company that manages pension money. All in all, this allows us to propose to the general meeting that we should pass on NOK 3.2 billion to customers via the premium fund this year.
On the pensions front, the government-appointed Pensions Committee presented its proposals last year. The Committee is unanimous in its view that the pension reform just over ten years ago was the right move. Its proposals are now being considered by the Government, which is also looking into other areas including special age limits and contractual pensions (AFP). KLP is assisting with these processes with the data and expertise that we have.
We are concerned that anyone who has a pension with us should receive sufficient information to make good retirement choices. That is why we have produced a pension calculator which people with a pension with KLP can find on My page at klp.no. There you will find useful information about your rights and how your pension will be affected by your own choices, such as early retirement, voluntary part-time working or drawing a pension while you are still working. We also offer personal guidance to those who want it.
KLP is continuing to develop its systems. In this new year of 2023, we have transferred around 150,000 old-age pensioners to our new pension system, which now holds all 180,000 of them. This means that we have stopped processing old-age pensions in the old system from 1988 and that all of them are now managed in our new system. It also enables us to offer new services to more of those who receive a pension from KLP, such as our new pension app where pensioners can keep track of the payments they receive. There is still a lot of work to be done, but the development and the new platform we are moving over to also allow us to offer new services to both pensioners and employers. This is another thing that can and will contribute to lower costs and better service. This year, the plan is to extend the new pension solution to cover self-service and administration of AFP, disability pensions and survivors’ pensions.
Total assets at the end of last year stood at NOK 901 billion. It is a great responsibility to manage so much money for other people, and we take that very seriously. In good times, we put a little aside to build up reserves, which provide stability and predictability even in difficult years like 2022. As well as ensuring competitive returns, KLP will also continue to be a driver for sustainable development, and contribute to the world achieving the goals set out in the UN Sustainable Development Goals and the Paris Agreement. There are many sides to this work. We try to influence the companies we invest in, we exercise our voting rights at general meetings, and above all, we are switching our investments towards renewables. We find that this work yields results and that is very satisfying.
Our owners are finding it very hard to meet the need for skilled workers, not least within healthcare. Those who are in work must be looked after so we can avoid sickness absence, disability and premature retirement. At the same time, efforts must be made to highlight the appeal of many of the roles for which we are recruiting. All of us at KLP want to contribute to this work, with HSE support, promotional films featuring our owners’ employees, and most recently a campaign to boost recruitment. Here we are working with the Norwegian Association of Local and Regional Authorities (KS), the Norwegian Nurses Organisation and the Union of Municipal and General Employees (Fagforbundet) at careers fairs, and supporting other activities to arouse young people’s interest in the professions we need. We want to help wherever we can to ease our owners’ problems now and in the future.
Group Chief Executive Officer, KLP