Research on the financial sustainability of the pension system
At regular intervals and using our long-term projection (LTP) and microsimulation (ELSI) models, we have produced data on pension expenditure and contributions and on the future development of pension benefits.
Under this research programme, we will use the models to produce baseline projections and various alternative projections of, for example, the effects on expenditure and contributions due to the return on pension assets and demographic development.
In addition to the regularly conducted long-term projections, we will assess the effect of suggested amendments to the pension system. We will improve our capacity to analyse the connection between pensions and overall social security and public finances.
Many of the challenges relating to pension financing are global. During the research programme period, we will conduct international comparisons of issues that are central to the financing of pensions, such as the development of pension assets and investment returns. We will also produce data on automatic stabilisers as one means to strengthen the financial sustainability of pension systems.
New publications
Financial markets support pension sustainability in Canada and Finland
The Canadian and Finnish partially-funded pension schemes have increasingly utilized the financial markets to keep their pension system financially and socially sustainable. In this research article we describe how the significance of funding and investments in equities has grown in the 2000s in these two countries. Unlike in many other countries, this has not led to contribution-based benefits or increasing individual risks. The article was published in the International Social Security Review in September 2023.
More on other sites:
- Research article: Pension financialization and collective risk sharing in Canada and Finland (Wiley)
International comparison of investment return: Worst investment year since the financial crisis
The average nominal return of the pension funds included in our comparison was more than eight per cent in the negative in 2022. The real return is even weaker since inflation pushed losses deeper in the red in all countries. The average real return was nearly –15 per cent. However, Finnish earnings-related pension investors performed above average.
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Long-term projections (LTP): Pension financing relies increasingly on investment returns
The Finnish Centre for Pensions published the most recent long-term projections on the outlook of statutory pensions in October 2022 (in Finnish; in March 2023 in English). The projections of the report span to the year 2090. The focus of the report is on projections of earnings-related pensions. The report examines the development of pension expenditure and benefit levels, as well as the financing of earnings-related pensions. The main results depict the development of contributions and assets under the Employees Pensions Act and an assessment of the financial equilibrium of the earnings-related pension scheme.
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Lowest contribution levels in Sweden and Finland in comparison of pension prices
The Finnish Centre for Pensions compared pension contribution levels in eight European countries. Pensions cost the least in Sweden and Finland, just over 12 per cent relative to the gross domestic product (GDP). The highest price tag on pensions is found in Italy and Denmark. Employers pay the main part of pension contributions in all other countries except Denmark.
Eight countries are included in the pension contribution comparison: Denmark, Finland, France, Germany, Italy, the Netherlands, Norway and Sweden. The comparison covers all contribution income paid by workers, employers, the self-employed and the State in 2020.
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