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The Norwegian example - provision for old age pensions

Saturday 18 February 2017

 German savers are suffering with their investments. There is hardly any interest to be earned from savings accounts and investments.

 The Norwegian State Fund offers an alternative.


Many investors are concerned about the gap in their retirement provision. The same applies to savers who are accustomed to place their money on deposit with fixed interest rates. They are not sure anymore on how to allocate their money and in which way they should continue to save.

 

The latest statistics are frightening, as they once again show that German equity ownership remains at a low level.  Since the financial crisis in 2008, with the collapse of many banks, Germans, more than ever before, are not  confident to invest in equities. Only 14 percent of the population owns shares or equity funds. On the other hand,  savings on deposit in banks have increased dramatically. A hefty € 596 billion of savings are currently held, without interest, in accounts.

 

In the process of setting up a private pension scheme or a long-term capital account, transparent guidelines will help to achieve this goal: a prime example, the Norwegian State Fund. In this fund Norway collects and invests the revenues from oil deposits in the North Sea.

 

It is not commonly known that the Norwegians now manage the largest state fund in the world, larger than similar institutions in Saudi Arabia, the United States of America or Japan. Assets under management  in Oslo now total about 847 billion Euros  (7,500 billion Norwegian Krone).

 

But how do fund managers invest these gigantic sums of money? It carries, after all, a responsibility for the prosperity of future generations in Norway. And here comes the big surprise. It has recently been reported in Oslo, that the asset allocation for equities will be increased from 62.5 per cent to 70 per cent. Among the ten largest equity positions in the state fund are classic value stocks, such as Nestle and Roche, but also shares of Apple as well as leading German stocks such as Daimler and Vonovia. I am pleased that the Norwegian government fund also follows the classic value approach of our "ME Fund - Special Values".

 

Interesting and frightening for me is the comparison with German pension schemes. German life insurance companies only allocate less than

five percent of  money from the people insured, in equities. The overwhelming balance unfortunately goes into low-interest bearing government bonds -

that is up to 80 percent of the insurance premiums. When asked who will be better off in the course of time, the answer is not difficult to arrive at.