Due to concerns about the development of its economy and its dependency ratio, Finland is preparing a reform of its pension system (Reform). A negotiation group consisting of labour market organisations reached an agreement on the main themes of the Reform in January 2025. This agreement functions as the basis for a government proposal, which sets out the suggested amendments to the existing legislation for the execution of the Reform. The working group tasked with the preparation of the government proposal has published a draft thereof, which was subject to public consultation 8 December 2025 – 4 February 2026. In the draft government proposal, it is envisaged that the amendments would enter into force 1 July 2027. However, as the legislative process is still ongoing, there is not yet final certainty on the exact amendments or the timing.
Increased returns through debt financing
As part of the Reform, several measures to improve the investment returns of pension insurance companies are suggested. One such measure would be to allow pension insurance companies greater flexibility in using debt to finance their real estate investments. As these companies represent one of Finland’s largest real estate investor groups, this change could create significant new business opportunities across the real estate and finance sectors.
Current regulation
The possibilities of insurance companies, including pension insurance companies, to take on debt are generally limited. The Insurance Companies Act (521/2008) includes a general prohibition for insurance companies to take on debt with only certain narrow exceptions. This prohibition also applies to most subsidiaries of insurance companies. Pension insurance companies, however, are subject to an additional exception under the Act on the Pension Insurance Companies (354/1997), which allows residential property companies that are subsidiaries of pension insurance companies to take on debt for a maximum of 50% of their total assets. This exception is only temporary and is applied only to residential property company subsidiaries founded from 2015 through to the end of 2027. The main goal of this exception has been to boost the production of rental properties.
Proposed new framework
According to the draft government proposal regarding the Reform, certain subsidiaries of pension insurance companies would be allowed to take on debt to fund real estate investments, including commercial real estate. This exception would apply to subsidiaries the purpose of which is to own real estate on behalf of a pension insurance company. Individual subsidiaries would not face separate debt limits anymore, but instead, the combined debt of all the subsidiaries of a pension insurance company would be capped at a total of 10% of the sum of all investments and 50% of all real estate investments of the pension insurance parent company. This would enable pension insurance companies to fund entire real estate projects solely with debt. In addition, regulatory clarifications are proposed to ensure that pension insurance companies can guarantee the loans of their subsidiaries. The impacts of the suggested provisions and the potential needs for further amendments thereof will be evaluated by 2035.
Market implications
The proposed new debt regulation would open the Finnish loan market further to one of the largest domestic real estate investor groups. The current temporary exception allowing residential property company subsidiaries to take on debt has been actively utilised and has been seen to boost investments in residential properties. The new regulation is expected to likely have a similar effect on the commercial real estate sector, particularly through increased acquisition activity and a corresponding rise in commercial real estate lending, as pension insurance companies would be able to utilise debt financing more freely and across their entire property portfolio.
Further reading:
Draft government proposal (as published for consultation, in Finnish): https://www.lausuntopalvelu.fi/FI/Proposal/DownloadProposalAttachment?proposalId=bb1c4650-d663-435f-8a2a-aee56c430fd6&attachmentId=26361
The Negotiation Group’s Agreement on the 2025 Pension Reform (in Finnish): https://ek.fi/wp-content/uploads/2025/01/Sopimus-vuoden-2025-tyoelakeuudistukseksi_neuvottelutulos.pdf
Final Report of the Working Group on the Reform of the Earnings-related Pension Scheme (in Finnish): https://julkaisut.valtioneuvosto.fi/bitstream/handle/10024/166081/STM_2025_7_rap.pdf