Adjustment rules for age limits linked to expected life expectancy  

In the 2017 pension reform, the retirement age for the old-age pension was linked to life expectancy as of those born in 1965. The aim of the reform was to maintain the ratio between time spent in retirement and time spent in working life. That way, the social and financial sustainability of pensions can be secured. In addition, the retirement age rises by three months for each age cohort as of those born in 1955 until the retirement age is 65 years for those born between 1962 and 1964.  

To maintain the ratio between time spent in retirement and time spent in working life, an adjustment rule for age limits was added to the act. It takes into account the development of the expected life expectancy. That means that the retirement age for each age cohort is changed so that the time spent in working life (the time from age 18 to the retirement age) and the time spent in retirement (life expectancy at retirement age) remains at the same level as in 2025.   

The adjustment is made for the first time in 2027 for persons born in 1965 who reach their retirement age in 2030 at the earliest. The adjustments shall be made in full months at a maximum of two months per year. Since the retirement age of persons born in 1962—1964 is 65 years, the retirement age of persons born in 1965 can be 65 years and 2 months at the most and at least 64 years and 10 months.    

In addition to the retirement age, the age limit for the partial old-age pension and the years-of-service pension will also be adjusted to the change in life expectancy. The retirement ages for the partial old-age pension and the years-of-service pension will change at the same time by as many months as the retirement age for the old-age pension changes. When confirming the retirement ages for the first time for those born in 1965 (for the year 2027), the retirement age for the partial old-age pension will be 62 years, and for the years-of-service pension 63 years.  

Age at which insurance obligation ends   

• 68 years (if you were born before 1958), 
• 69 years (if you were born between 1958 and 1961), or 
• 70 years (if you were born in 1962 or later).  

Under current law, the age at which the insurance obligation ends is not linked to changes in life expectancy. The age at which the insurance obligation ends will be examined again when life expectancy starts to affect the retirement age. After reaching the age at which the insurance obligation ends, the employer no longer insures the worker in a pension insurance company, nor does the worker earn new pension based on earnings from work.   

Determining the retirement age  

The retirement age of a person that was born in 1965 or later is determined so that the ratio between the difference of the retirement age and the age of 18 and the calculated life expectancy at the retirement age is the same as the ratio in 2025. Expected life expectancy is calculated using the available mortality risk rates of Statistics Finland for the previous five years. The ratio for 2025 is calculated using 65 years as the retirement age, and the life expectancy coefficient is calculated based on the mortality statistics of Statistics Finland for the years 2020–2024.   

The retirement age ra_v for a person born in the year 1962 is calculated from the equation

ra_v – 18   ₌  65 – 18
le(ra_vq_v)    le(65, q₂₀₂₅)

Where

le(x,q)   the life expectancy for a person aged x, whose mortality rate is q, 
q_v           average mortality rate in years y-6, y-5, y-4, y-3 and y-2 and 
q₂₀₂₅    average mortality rate in the years 2020–2024. 

The retirement age ra_v cannot deviate by more than 2 months from the previous year:
ra_v-1 – 2/12 ≤ ra_v ≤ ra_v-1 + 2/12

When the retirement age is linked to changes in life expectancy, the starting age for the cohort-specific longevity indicator used when calculating the life expectancy coefficient also changes. This way the change in the expected life expectancy is not considered twice. When calculating the capital value of pensions, the change in the retirement age is taken into account so that the age at which the age-specific longevity indicator is calculated changes in line with the change in the retirement age from age 65.   

Overall assessment made every five years can influence the development of the retirement age  

To support the developing of the earnings-related pension system and pension policy decision-making, an overall assessment of the development of working lives and the financial and social sustainability of the earnings-related pension system is made at regular intervals. The assessment can be used, for example, when considering possible deviations from the adjustment rules for retirement ages and when deciding at what age the insurance obligation ends.   

One of the key indicators in assessing the development of working lives is the labour years ratio. The labour years ratio is the ratio between the five-year average expected time in the labour force of an 18-year-old and the five-year average life expectancy of an 18-year-old. The calculation of the labour years ratio is based on Statistics Finland’s employment and mortality statistics. The five-year average expected time in labour is calculated by the Finnish Centre for Pensions.   

In addition, the impact of various factors on the development of the labour years ratio is assessed. The aim is to retain the labour years ratio at the level of year 2025 at the minimum. The labour years ratio for the base year 2025 is calculated based on statistical data of 2020—2024. Factors taken into account in the assessment include   

• the development of the effective retirement age,  
• the effectiveness of the adjustment rule for the life expectancy coefficient and the age limits,  
• socioeconomic differences between population groups,  
• gender differences,  
• disability pension incidence rates,  
• development of years in good health,  
• length of working life and factors affecting it at different stages of the career,  
• employment and unemployment rates by age groups, and  
• replacement rate and ratio of pensions to average earnings.  

In addition, attention must be paid to the development of the earnings-related pension system from different angles such as extending working lives, adequate pension level, financial sustainability and intergenerational fairness.   

The first assessment will be made in 2026, after which the assessment will be made regularly every five years. 

Confirming age limits  

The Ministry of Social Affairs and Health confirms with a decree the age limit adjustments in line with the adjustment rule. The retirement age and other age limits are confirmed for the year in which the age cohort turns 62, no later than two months before the beginning of the calendar year. That means that the retirement age is known several years before retirement and the person can plan their future and prepare for retirement well ahead in time.    

The life expectancy coefficient is confirmed at least one month before the beginning of the calendar year for which it is determined. That means that the life expectancy coefficient used to adjust old-age pensions is confirmed at the latest in November of the year in which the workers turn 61 years.   

The age limits are confirmed before the life expectancy coefficient so that the age limit for the partial old-age pension is available early enough. The age limits and life expectancy coefficient confirmed for the same age cohort are based on the same data.