FAQs on life expectancy coefficient and life expectancy
The life expectancy coefficient is applied to the
- old-age pension,
- disability pension,
- partial old-age pension,
- years-of-service pension, and the
- cash rehabilitation allowance.
The life expectancy coefficient is not applied to the survivors’ pension, but the survivors’ pension is calculated based on the deceased person’s pension to which the life expectancy coefficient has already been applied. In other words, if the survivors’ pension incidence occurred before 2009, the life expectancy coefficient is not applied to the pension that the survivors’ pension is based on and thus not on the survivors’ pension.
At the onset of old-age pension, the accrued pension is adjusted with the life expectancy coefficient of the year in which the employee turned 62 years of age. If the old-age pension starts before that year, it is adjusted with the confirmed life expectancy coefficient of the year in which the pension starts.
The life expectancy coefficient is applied to disability pensions so that only the part of the pension that has been earned up to the disability incidence is multiplied by the life expectancy coefficient confirmed for the 62-year-olds in the year in which the disability begins. In other words, the life expectancy coefficient is not applied to the projected pension component of the disability pension.
The younger the age at which disability begins, the less the life expectancy coefficient affects the disability pension. When the disability pension is converted into an old-age pension, it not altered again. Thus the effect of the life expectancy coefficient on disability pensions is more mitigated than on old-age pensions.
The life expectancy coefficient will be applied to all disability pensions beginning as of 2027 when the old-age pension of the age cohort is linked to life expectancy.
The life expectancy coefficient is applied to all pension under earnings-related pension acts when they start.
The life expectancy coefficient does not apply to your earnings-related pension if
- you were born before 1948,
- you became disabled before 2010, or
- you retired already before 2010.
The life expectancy coefficient does not apply to your earnings-related survivors’ pension if
- your deceased spouse’s pension began already before 2010, or
- your survivors’ pension started already before 2010.
How long a person lives does not affect the life expectancy coefficient as such. What matters it is how life expectancy changes as of the year 2009.
Women live longer than men, but in recent times, men’s life expectancy has increased faster than women’s. However, the difference in changes in life expectancy is not large. If men and women had different life expectancy coefficients, men’s life expectancy coefficient would cut pensions more than women’s.
There can be no difference between the genders in a statutory pension system. That is why also the life expectancy coefficient, as well as all other rules for determining the pension, are gender-neutral.
If you postpone retirement up to the target retirement age of your own age cohort, your increment for late retirement offsets the cut caused by the life expectancy coefficient in your monthly pension. In addition, you earn new monthly pension at a rate of 1.5 per cent of your monthly earnings up to the age limit at which your insurance obligation ends.
When calculating the life expectancy coefficient and the age limits, we use the figures submitted by Statistics Finland. In calculating the expected life expectancy, we use the mortality rates of a period of five years so that an exceptional development in one year does not have an unreasonably high effect.
The life expectancy calculated for a person of a certain age in a certain calendar year shows how many years, on average, that person will live if mortality remains at the level of the calendar year in question (period-specific expected life expectancy) For example, the life expectancy of 1970 depicts the mortality rate in 1970, not the length a person who was born in 1970 is expected to live. Correspondingly, the expected life expectancy calculated in 2020 for a 62-year-old person depicts the mortality of older people in 2020.
The life expectancy calculated for the age group is different depending on at which age it is calculated. The life expectancy of a 62-year-old is higher than that of a newly born. This is because the remaining life expectancy of a 62-year-old does not take into account the mortality in age groups younger than that, while the life expectancy of the newly born takes into account the mortality of people of all ages. The same phenomenon is repeated more strongly if we examine, for example, the remaining life expectancy of a 100-year-old person.