The Finnish 2005 Pension Reform

Life Expectancy Coefficient Regulates Pension Expenditure

The life expectancy coefficient is a mechanism affecting the pension amount and used to hold in check the pension expenditure due to a prolonged life expectancy. The coefficient is based on the average length in life expectancy calculated on the basis of the mortality rates for the preceding five years. The coefficient is determined annually for those who have turned 62 years.

According to the 2005 legislation, the life expectancy coefficient is applied to all starting old-age pensions and to the surviving spouse’s pension at the point when the pension would be reduced based on the surviving spouse’s own pension income. The life expectancy coefficient affected pensions for the first time in 2010 and concerned persons born in 1948 and later.