Impact on Pensions
The old-age pension is multiplied by the life expectancy coefficient determined for each birth year cohort. The coefficient remains unchanged throughout time in retirement.
Some people may have the right to retire early on an old-age pension, earlier than at age 62. If they retire early, their pension will be adjusted with the life expectancy coefficient confirmed for the year in which their old age pension begins. This coefficient will not change when they reach the age of 62. In such cases, the life expectancy coefficient used to calculate the old-age pension may thus deviate from the coefficient confirmed for the own age cohort.
If a pension recipient has been granted a pension before 2010, their pension in payment has not been adjusted with the life expectancy coefficient. However, if they work in retirement and earn new pension, this new pension will be adjusted with the life expectancy coefficient when it is granted, providing the pension recipient was born in 1948 or later.
When retiring on a disability pension
The life expectancy coefficient is applied to a disability pension when the person getting the pension has lost their ability to work in 2010 or later. The life expectancy coefficient for this pension will not change when the disability pension becomes an old-age pension.
The life expectancy coefficient will be applied to any new old-age pension earned during the period on a disability pension when this part of the pension is granted at the old-age retirement age.
The disability pension is multiplied by the life expectancy coefficient when the pension starts. The amount of the disability pension earned by the time of the pension contingency will be multiplied by the life expectancy coefficient issued for the age group that turns 62 during the year that the disability pension begins.
The life expectancy coefficient is applied to the earned pension but not to the projected pension component (from the time of disability to the time of reaching the retirement age). That means that the life expectancy coefficient applied to the disability pension is permanently more lenient than the coefficient for those who continue working until their retirement age: it is applied to only a part of the pension and it is determined according to the expected longevity of the older age groups. If the longevity develops as projected, the coefficient for younger age groups would cut the pensions more.
As of 2027, the total disability pension (including the projected pension component) will be adjusted with the life expectancy coefficient. The retirement age will be linked to life expectancy and the life expectancy coefficient will be mitigated.
Estimated life expectancy coefficients used in pension assessments
Based on Statistics Finland’s population projection, the Finnish Centre for Pensions projects the life expectancy coefficient to be used in earnings-related pension assessments. The forecasts are updated with annually realised mortality figures and possible new population projections of Statistics Finland.
The impact of the life expectancy coefficient is included in pension amounts calculated for the pension record.
The life expectancy coefficient is not applied in the following cases:
- the pension recipient was born before 1948
- other than a part-time pension began befpre 2010
- the disability began before 2010
- the disability pension becomes an old-age pension
- a soldier’s pension right has come into force before 2010
- when calculating a private-sector registered supplementary pension.
The life expectancy coefficient is not applied to the national pension
A pension recipient’s total pension is also affected by the national pension. The life expectancy coefficient is not applied to the national pension.
The national pension is determined based on the amount of the earnings-related pension. The national pension changes each year in line with changes in prices. From time to time, separate step increases are made to the national pension.
For a person receiving a national pension, the national pension compensates about half of the effect of the life expectancy coefficient on the earnings-related pension. For a person receiving a guarantee pension, the national pension and the guarantee pension compensates the total effect of the life expectancy coefficient.
How the national pension in calculated is explained in more detail in the section “National pension benefits”.