Roughly one third of the Finnish population has saved for retirement. Although nearly 50 per cent of Finns assess their retirement income to be inadequate, saving has not increased in recent years. The reason is simple: people cannot afford to save for retirement.
We studied the need and the ability of Finnish citizens to save for retirement. Our review period ranged from 2011 to 2014. Results show that private saving has not increased during that period. One of the main reasons is that people cannot afford to do so.
Nearly half of the 35-67-year-old respondents in a survey conducted in 2014 estimate that their retirement income will be low or fairly low. Yet only a minority of them is saving for retirement.
“Often those who can afford to save do so. As a rule, they would do fairly well in retirement anyway. At the same time, many of those who predict their retirement income to be low cannot afford to save. They have a low income, are unemployed or lack the capacity to work,” explain Economist Kati Ahonen and Senior Researcher Jyri Liukko of the Finnish Centre for Pensions.
Pension savers divided by reason and need for saving
People who save for retirement can be divided into two groups, depending on what they are saving for and their need to save. Approximately 40 per cent estimate to use their retirement savings for everyday needs, such as living, food and transportation. They predict their future pension income to be fairly low.
Others save mainly for leisure-time consumption, travelling and hobbies. In both groups, it is common to prepare for care and health services and unexpected expenses.
Economist Kati Ahonen, Finnish Centre for Pensions, kati.ahonen(at)etk.fi, tel. +358 29 411 2539
Senior Researcher Jyri Liukko, Finnish Centre for Pensions, jyri.liukko(at)etk.fi, tel. +358 29 411 2154