Five-per-cent increase to earnings-related pensions
The Finnish Centre for Pensions has sent the final calculation for the 2024 indexes under the Employees Pensions Act to the Ministry of Social Affairs and Health. According to the calculation, both the earnings-related pension index and the wage index rise by more than 5 per cent compared to 2023.
The Finnish Centre for Pensions’ calculation shows that, in 2024, the earnings-related pension index increases slightly more than the wage coefficient.
In 2024, the earnings-related pension index is 3037, which means an increase of around 5.7 per cent to earnings-related pensions at the turn of the year.
The wage coefficient in 2024 is 1.637. Compared to 2023, the wage coefficient is 5.1 per cent higher next year.
The earnings-related pension indexes adjust pensions in payment to secure their purchasing power. At the time of retirement, the wage coefficient adjusts career lifetime earnings to the level of the year in which the pension begins.
The weightings of the index adjustments are based on changes in consumer price and earnings level indexes calculated by Statistics Finland. The earnings-related pension index puts greater weight on price development while the wage coefficient emphasizes earnings development.
The Ministry of Social Affairs and Health will confirm earnings-related pension indexes for 2024 at the end of October.
Timing of retirement not as significant as it was last year
When the indexes were last adjusted, the earnings-related pension index was considerably higher than the wage coefficient. That favoured retirement before the end of 2022. As a result, many who were already considering retirement took out their earnings-related pension before December 2022.
Now the situation is different.
“This time, the gap between the indexes is rather small, as we projected at the turn of August-September. That is why the timing of retirement is not as significant for the pension amount as it was a year ago”, says Economist Timopekka Hakola (Finnish Centre for Pensions).
However, if you plan to retire in 2023, you should apply for the pension by the end of November 2023. “If you are already retired, you don’t have to take any action because of the index adjustment. Pensions in payment increase automatically, so you don’t need to claim it separately””, Hakola explains.
FAQs about indexes
All earnings-related pensions in payment are adjusted with the earnings-related pension index:
- the old-age pension and the partial old-age pension
- the disability pension and the cash rehabilitation allowance,
- the survivors’ pension (the surviving spouse’s pension and the orphan’s pension),
- the years-of-service pension, and
- the vocational rehabilitation allowance.
The index adjustment is made for the first time in the year following the year in which you retired. For example, if you retire at some point in 2023, your pension will be adjusted with the earnings-related pension index for the first time in January 2024.
Always plan your retirement, including when to retire, to fit your own life situation. If you take out earnings-related benefits, check also how that will affect your taxation. Earnings-related benefits may also affect benefits and pensions you are paid by Kela.
The longer you work and the later you retire, the higher your earnings-related pension will be. If you retire late, your old-age pension will grow in two ways: via the increment for late retirement and the new pension you earn while working.
You accrue earnings-related pension for each year of work. To put it simply, your pension is calculated by multiplying your annual earnings with 1.5 per cent and the life expectancy coefficient. Your monthly pension is calculated by dividing the result by 12.
- Will you retire soon? Use our calculators to estimate how the indexes will affect your pension. (Etk.fi news 19 Sept. 2023)
- How do I claim my old-age pension? (Tyoelake.fi)
- Check your retirement age (Tyoelake.fi)
- Life expectancy coefficient by birth year (Tyoelake.fi)
- Earnings-related pension indexes (Etk.fi)
Addition to the news (30 October 2023):
The Ministry of Social Affairs and Health has confirmed the earnings-related pension indexes for 2024 as calculated by the Finnish Centre for Pensions.