Citizens, journalists and experts enjoy making comparisons which put their national pension systems into a wider context. It is common to compare retirement ages between countries. Although such an exercise can be informative, a simple comparison can result in misunderstandings. Here are three tips to avoid common mistakes.
People retire at a considerably later age in Finland and Denmark than before. In the last decade, these two countries have caught up with the other Nordic countries in this respect. Also in Estonia, people retire at a significantly higher age. In Norway, on the other hand, the effective retirement age has dropped steeply. What pension policy solutions underly the changes?
Pension systems are not easy to comprehend. In Europe several different pension designs coexist. A short story might shed some light on why people take pride in the pension system of their country.
Working life is constantly changing. This has consequences for pensions as well. In Finland, the good news is that employment rates have been rising, careers have been relatively stable and various non-standard forms of employment are covered by the pension system. The challenge is to anticipate developments in the labour market that affect the economic and social sustainability of the pension system in the longer run.
While there is rich research on Finnish retirement, relatively little is known about personal motivations behind retirement decisions. In latest round of the Survey on Health, Ageing and Retirement in Europe (SHARE) Finnish pensioners were asked a simple question: Why did you retire? More than 80 per cent indicated that they retired because they became eligible for a pension. Compared to other European pensioners, the influence of poor health on retirement decisions in Finland raises concern.
The minimum net pension in Norway is the highest in all Nordic countries, but the purchasing power is the largest in Denmark. The Danish can buy a Big Mac each day of the year with one month’s minimum pension. The Finns have to settle for a Big Mac every second day. The Swedes get the lowest number of Big Macs with their monthly minimum pension.
The Board of Directors has approved the new strategy of the Finnish Centre for Pensions as of 2022. The Finnish Centre for Pensions and its extensive interest groups share a common vision for the Finnish pension system. The vision crystalizes the importance of pensions for individuals’ income security and a pension system in financial equilibrium.
Globalisation, deindustrialisation, automation, digitalisation and liberalisation are often believed to make working life more fragmented and unstable. We investigated such claims in the recently completed project “Fragmented work careers?” (“Pirstoutuvatko työurat?”), led by researchers of Tampere University. Overall, we found no definitive trends towards fragmentation and destabilisation in Finland. However, we identified persisting labour market inequalities between genders and socioeconomic groups. These findings have important implications for pensions as well.
The Finnish Centre for Pensions recently reported that Finns continue to retire at a later age. In line with the rising eligibility age for the old-age pension, the average retirement age went up three months in 2019 compared to 2018. This can be seen as a successful outcome of a series of reforms in the Finnish pension system and labour market and is good news in many ways. However, figures of rising retirement ages tend to hide socioeconomic inequalities in extending working lives.
Our pension system is currently sailing through deep waters. The seas are likely to get rougher in the future. Reduced fertility rates and lower interest rates form dark clouds on the sky over our pension system. The most recent gust of icy winds is the corona pandemic, which has only added to the challenges pension financing faces. Yet it is possible to navigate through the rough seas – partly on automatic pilot.
