The Life Expectancy Coefficient Affects the Pension Amount

The change in life expectancy affects starting pensions through the life expectancy coefficient. The purpose of the life expectancy coefficient is to limit the growth in pension expenditure due to the rising life expectancy and to encourage people to extend their working lives.

As life expectancy increases, the life expectancy coefficient reduces the amount of the paid monthly pensions. Note that it does not reduce the total amount of a pensioner’s pension during time time on an old-age pension if the pensioner reaches the age of the increased life expectancy. The level of comparison is the life expectancy in 2009, for which the life expectancy coefficient was set at a value of one (1.00000).

Confirmed life expectancy coefficients for different age groups

 Year of birth

 Life expectancy coefficient

 1947

1.00000

 1948

0.99170

 1949

0.98689

 1950

0.98351

 1951

 0.97914

 1952

 0.97552

 1953

0.97200

1954

 0.96800

 1955

0.96344

1956

0.96102

If a person approaching retirement wants to set off the effect of the life expectancy coefficient, they have to work longer.

The life expectancy coefficient was included in the 2005 pension reform and applied for the first time to pensions starting in 2010. The life expectancy coefficient is determined for each birth year group at the age of 62 and will not change after the pension has started.

When the retirement age of the age groups born in 1965 and later are linked to the change in life expectancy, the life expectancy coefficient will be mitigated. As of 2027, the changes in retirement age will be taken into account when determining the life expectancy coefficient.

The extended life expectancy will also affect the pension amount in several other countries.

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