2005 Reform

Pensions for Entire Work Career

Pension Accrues for Earnings Throughout Working Career

After the pension reform in 2005, earnings-related pension accrues now more favourably both at the beginning and the end of the insured’s working life. The previous lower limit for pension accrual of 23 years is now 18 years.

The earnings-related pension is calculated on the basis of all earnings throughout the insured’s working life. Earnings reduced by the earnings-related pension contribution are adjusted with the wage coefficient from the wage coefficient level of the year of earning to the level of the year in which the pension starts.

Pension provision earned before 2005 is calculated in advance into the accrual register according to rules in force before 2005.

The accrual rate is linked to the insured’s age. Earnings-related pension accrues at an annual rate of 1.5 per cent between the ages of 18 and 52. The older cohorts are encouraged to continue at work with an accrual rate of 1.9 per cent between the ages of 53 and 62 and as much as 4.5 per cent between the ages of 63 and 68. The new accrual rates are not implemented in retrospect.

However, for those born before 1950, public-sector pension accrues at a rate of 2 per cent of the annual earnings up to the 63rd birthday. After that, the accrual rate is 4.5 per cent.

A person on an old-age pension may start in a new employment. New pension is accrued at a rate of 1.5 per cent of the annual earnings. This component of the pension is paid as of the age of 68.

Pension accrues also for studies leading to a degree and for the parenthood allowance.