Pension knowledge and trust in the pension system
Knowing pensions helps people make decisions concerning their own pensions. Knowing pensions also helps people assess the general discussion on pensions and their financing, and to base the assessments on facts.
Trust in the pension system, its future and functionality may also affect the perception of how acceptable pensions are and assessments of one’s own financial situation in retirement.
From the point of view of the functionality and future of the pension system, pension knowledge and trust in the pension system are important research themes.
Our research shows:
- Most Finns consider their knowledge of pensions to be poor or fairly poor. There is also a great deal of uncertainty about the details of pensions.
- In general, the pension system is seen as reliable but, when looking in more detail, there are concerns about how well the pension system works and what its future is.
Knowing pensions
Surveys show that few Finns feel that they know pensions well. Some of the details relating to the pension system are well known while others are not.
Pension knowledge can be approached through perceived levels of knowledge or from the perspective of detailed knowledge.
Few assess that they know pensions well
The 2019 survey on views on pensions examined the pension knowledge of 25–67-year-olds. More than half of the respondents felt that they know pensions poorly or fairly poorly. Every ninth respondent assessed that they know pensions well or fairly well.
The 55–67-year-olds, the self-employed and pensioners felt that their knowledge of pensions is better than average. Women, the 25–34-year-olds, those with a basic education and those in low-income households estimated that their knowledge of pensions is poorer than average
Previous surveys (in 2011 and 2014) explored people’s knowledge of the national and the earnings-related pension system. At that time, nearly half of the respondents assessed that they know the pension system poorly or fairly poorly. Less than one fifth of the respondents assessed that they know the national and the earnings-related pension system well or fairly well.
Pension knowledge has also been studied through the Pension Barometer, an annual survey in which 18–79-year-olds are asked about their views on pensions. Between 2017 and 2022, the perceived knowledge of pensions has improved. After that, it has remained at an even level.
The share of persons who assess that they know pensions well or fairly well has levelled out at around 45 per cent of the respondents. The share of persons assessing that their knowledge is poor or fairly poor is around 30 per cent. Older respondents, in particular, feel that they know pensions better now than before.
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Surveys have been conducted to map the knowledge of details of the pension system. Finns know that the retirement age for the old-age pension varies and that a lion’s share of the pension contributions are used to finance pensions. Yet only few know, for example, the size of the pension contributions withheld from their wages.
Varying degree of knowledge of features of the pension system
In the 2019 survey on views on pensions, pension knowledge was measured with five statements concerning details of the pension system. Some of the statements were correct while others were incorrect.
Most statements were identified correctly as either true or false. The retirement age for the old-age pension, the impact of self-employed persons’ confirmed income and the use of pension contributions were best known. Unemployed person’s right to the partial old-age pension and that pension accrues for childcare at home and studies were less well known.
The subjective views of pension knowledge and the knowledge of details broadly correspond. Younger respondents assessed their pension knowledge to be poorer than average, yet they assessed more statements correctly than average.
More than one in ten Finns could assess the pension contribution level correctly
In the 2019 survey on views on pensions, the respondents were asked to assess how many per cent of their wage a worker and their employer together pay in pension contributions (or the self-employed of their confirmed income). More than half of the respondents said they do not know. A majority of those who provided an assessment underestimated their pension contribution level. Of all respondents, 13 per cent provided an accurate estimate (with +/- 5 per cent error). In 2019, the average combined employee and employer contribution was 24.4 per cent.
Those with a higher education and the self-employed were more often correct in their estimates of the contribution rate than others. On average, men and those with a higher than basic education more often gave incorrect estimates. Women, those with a basic education and those in low-income households were more often uncertain.
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Trust in pensions
Trust in pensions is a multidimensional phenomenon. It can be assessed not only from the points of view of general trustworthiness and functionality but also from the points of view of how the goals of pensions are met, pension adequacy and concerns relating to pensions.
As a rule, Finns trust the pension system
According to the 2019 survey on views on pensions, more than 70 per cent of 25–67-year-olds found the Finnish pension system to be trustworthy.
The over-55-year-olds and those with a tertiary degree trusted the system more often than others. The under-45-year-olds, those living alone and those who felt in poorer health, on the other hand, were more critical.
Trust in the pension system is also measured via the annual Pension Barometer. According to the survey, nearly three in four 18–79-year-olds had a positive view of the trustworthiness of the pension system. Men and older respondents trusted the pension system more often than others.
The share of persons finding the pension system to be trustworthy has grown since 2017. At the same time, the number of persons taking a critical stance towards the pension system has dropped from one fourth to less than one fifth.
Experience of continuity and inequality affect trust
According to the 2014 survey on trust in pensions and the 2019 survey on views on pensions, trust in pensions is boosted by the following: the perception of a secure and continuous system, trust in the Finnish welfare state, a transparent and developing system, and funded pension assets.
Trust in pensions is reduced by the following: experiences of inequalities, an insecure economic and employment situation, an ageing population and changing or weakening benefits.
Publications:
- Palomäki et.al. 2021: Trust in the pension system 2019: Questionnaire survey on views relating to pensions (Julkari, summary in English)
- Eläkebarometri (Pension Barometer) 2023 (Julkari)
- Liukko 2016. Mikä lisää ja mikä vähentää luottamusta eläketurvaan? (What increases and what decreases trust in pensions?) (Julkari)
The 2019 survey on views on pensions maps the views on the current pension system and its future. The views were divided on several questions.
Views on current status of the pension system vary
Slightly less than half of the respondents found that pensions ensure a reasonable income for current retirees. Nearly as many were critical about the adequacy of pensions.
An ample one third felt that pension assets were managed reliably, while one quarter disagreed fully or partly.
Only around one quarter of the respondents found the pension system to be fair, while nearly half disagreed.
Men, those with a higher education and those who perceive they are of good health were more positive towards the current status of the pension system than the others. The views of the current status of the pension system did not differ between the age groups. Pension asset management was trusted more often by high-income persons than by others. More often than others, pensioners perceived the pension system to be fair.
Future of pension system less trusted than the current situation
Only an ample one fourth of the respondents assessed that the system will be able to pay pensions in the future, and more than half felt that the payment burden of the young is too high.
Women, the young and those who perceived their health to be poor were more critical towards the pension system’s ability to pay pensions. The young and the respondents who did not have children were more often worried about the payment burden of the young.
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Several questions about income, decision-making and economic outlook related to the functions of the pension system. Trust in the pension system can be measured also through concerns relating to income, decision-making and economic outlook.
Income concerns the most
Factors relating to income in retirement causes most concern. Three in four of the respondents of the 2019 survey on views on pensions were at least somewhat concerned about the livelihood of low-income pensioners. Around two in three were concerned about access to affordable social and health services.
Slightly less than two in three respondents were concerned about the uncertainty surrounding the conditions of retirement and political decision-making, the ageing of the population and economic and employment trends. Least concern was caused by pension asset investment risks.
As a rule, men and those who perceived that they were in good health were less concerned than others regarding all presented statements. The young and those with a tertiary degree, on the other hand, were less often concerned about income in retirement and pension asset investment risks.
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