Open fund member meeting of Gildi: A review of operations and private pension savings

At Gildi's fund member and representative council meeting, held at the Grand Hótel Reykjavík yesterday, 12 November, topics covered included returns, operations and the fund's position during the year, as well as market developments.

The meeting heard that net nominal return for the first nine months of the year was 7.5% and net real return was 2.7%. The fund's net assets at the end of September stood at ISK 1,075.5 billion, an increase of ISK 83.6 billion since the start of the year. The fund's estimated actuarial position stood at -4.4% at the end of September. Pension payments to almost 30,000 fund members totalled ISK 25.2 billion in the first nine months of the year, an increase of nearly 13% year on year.

Numerous other matters were discussed, including the Central Bank of Iceland's recent discussion paper on pension funds, the fund's implementation of its shareholder policy so far this year, and the government's proposed changes to the contribution for equalising the disability burden of pension funds. It emerged that if the contribution were abolished in the future, this could result in a reduction of up to 5.7% in the overall pension rights of Gildi's fund members. Those present expressed concern about the situation and urged both Gildi's management and the representatives of the trade unions affiliated with the fund to oppose the government's current proposals to abolish the equalisation contribution.

Options in private pension savings and designated private pension savings

The review of options in private pension savings showed, among other things, that costs vary considerably between the different investment options offered by domestic and foreign providers of private pension savings. For example, if contributions to private pension savings are stopped one year after they begin (or the balance is transferred or withdrawn), the cost to the fund member can vary greatly. The meeting was shown examples where such costs, in the case of Gildi's Framtíðarsýn 1, amount to 0.58%, compared with a cost of 10.9% at Allianz (Target4Life) and 75.8% at VPV (Future Pension Classic). Different scenarios for expected returns over one year and five years were also reviewed.

The examples shown at the meeting were prepared using the public key information documents of Gildi and the providers concerned, which allow fund members to see, in a simple and consistent way, the costs and expected returns of individual investment options, among other things. Gildi's key information documents are available here.

The meeting heard that many of Gildi's fund members have registered for designated private pension savings in recent years, and that a majority of them have chosen to transfer their funds to foreign providers. The estimated cost of these options is, in some cases, many times higher than at Gildi, as was outlined at the meeting.

There was extensive discussion of the matter, with those present expressing concern that fund members were, in some cases, not sufficiently informed about the advantages and disadvantages of the different investment options and choices in private pension savings and designated private pension savings. It was considered important to increase the provision of information on this matter, in order to support more informed decision-making by fund members in respect of this important form of savings.

Stefán Ólafsson, Chairman of Gildi's Board, opened the meeting, with presentations given by Davíð Rúdólfsson, CEO, and Rósa Björgvinsdóttir, Head of Asset Management. The meeting was chaired by Aðalbjörn Sigurðsson, Gildi's communications and marketing specialist.

Presentation slides

A recording of the meeting can be viewed here: