Is the Finnish pension scheme in debt as only 29 per cent of its liabilities are covered by investment assets? Looking at it from another angle, the funding balance is 98 per cent. How can the figures be so different?
The opportunity to use publicly provided services supports pensioners’ livelihood and well-being significantly. The Pension Adequacy Report 2018 of the European Commission highlights that an evaluation of an adequate pension depends on what the pension is supposed to cover, including consumption of goods and services. From this perspective, it is possible to draw a parallel between social transfers in cash and benefits received from the use of public services. On the other hand, out-of-pocket fees can be a substantial financial burden, in particular for low-income pensioners.
We recently updated our comparative data representing the size of pension funds in different countries in relation to the country’s GDP. We included funds of both statutory (1st pillar) and occupational (2nd pillar) pension schemes. As a reader’s guide we would like to briefly explain some of the different funding mechanisms.
Without adaptation, increasing life expectancy entails cost-increases for statutory pension systems. In Finland, earnings-related pensions have undergone a major reform by adapting both retirement ages and the pension formula to increased life-expectancy. The European Commission’s Annual Employment and Social Developments Review lifts up the Finnish reform as an example of how to incentivize longer working lives. Mikko Kautto explains the essence and motivation behind automatic adjustment mechanisms.
Did you ever look for your glasses just to realize that you were already wearing them? Or try to find a pencil just to discover that you could just as well have used a pen that was lying right in front of you? Such blunders do not only happen in our everyday lives, they can also happen in pension reforms and in research on pensions. The reason is that a stakeholder dialogue does not always take place.
In its latest pension reform, Finland relaxed the rules for retirement, giving people more freedom to combine work and retirement. By introducing a new partial pension, Finland is following the old-age pension scheme design of Sweden and Norway. So far, the experiences from all three countries indicate that people want to combine work and retirement income. It remains to be seen whether gradual retirement will become as popular in Finland as it is in Norway, or whether it will stay at a more moderate level, as in Sweden.
Pensioners in Europe have considerably more money to spend today than in the early 2000s. The poverty rate has gone down by around 20%, and the gap in income between pensioners and working-age people has become narrower. These are all good news about pensioners’ economic welfare in Europe. But if we look at this from a more differentiated angle, we see that there is more to the story.
It is said that one of the core values of Europe is diversity. This certainly holds true when looking at pension systems. There is such a diversity of actors, financing mechanisms as well as public-private mixes that it is easy to conclude that Europe embraces diversity as much in its pension systems as in its cultures and languages. Lisää uutisia
Countries that pay more attention to human capital development and capacitating policies throughout the life course, and not just at the tail end of working life, are successful in extending working lives. This is the main finding of our recent comparative study, pointing to the long-term effects of social policy on the whole.
At first glance, the thought of extending working lives by doing less work seems counter-intuitive: how can something be extended by reducing it? However, when analyzing working lives we need to scrap intuition. The lengths of working lives are not predetermined; people constantly make choices that will have an impact on the total length of their working lives. That’s why something can be reduced (transition from full-time to part-time work) and extended (through later retirement) at the same time.