Preliminary information on 2024 indexes: Earnings-related pension index likely to rise slightly more than the wage coefficient
The Finnish Centre for Pensions estimates that the 2024 earnings-related pension index will grow slightly more than the wage coefficient. As a result, a person who retires on an earnings-related pension before the end of 2023 may receive a slightly higher index increment than a person who retires after the turn of the year. A person who considers claiming a pension should also note the impact of continued work, taxation and Kela benefits on their pension amount.
Two indexes affect earnings-related pensions: the earnings-related pension index and the wage coefficient.
The aim of the earnings-related pension index is to retain the purchasing power of pensions in payment. The wage coefficient, on the other hand, affects starting pensions: it brings the pensioner’s career earnings up to the level of the year of retirement.
The current estimate of the Finnish Centre for Pensions is that the earnings-related pension index will grow slightly more than the wage coefficient in January 2024. It follows that a person who retires in 2023 may get a slightly higher index increment than a person who retires after the turn of the year, in 2024. The effect is similar also for the partial old-age pension.
Index impact varies in different life situations
Retirement should be planned and timed based on one’s own situation. The significance of the indexes varies per person depending on, among other things, working life, employment state and already accrued pension. If you take out earnings-related benefits, check also how that will affect your taxation. Earnings-related benefits may also affect benefits and pensions paid by Kela.
Economist Timopekka Hakola (Finnish Centre for Pensions) reminds that postponing retirement is financially more profitable than hunting for benefits and indexes. Postponing retirement increases the earnings-related pension via the increment for late retirement. Pension also incrues for continued working.
“If you plan on retiring soon, check these matters relating to your pension via your pension provider’s website”, Hakola recommends.
Difference in indexes lies around half a percentage point
Last year, the earnings-related pension index development was exceptional, which manifested itself in a flood of pension claims. Hakola, who calculates indexes, does not see this year’s situation as equally exceptional.
“Last year, the gap between the earnings-related pension index and the wage coefficient was three percentage points. This year, it will be much narrower. It would appear to remain at less than one percentage point.”
The pension index development reflects the changes in consumer prices and wage trends. Hakola’s calculations of the current situation show signs of going back to normal.
“In light of the economic outlook, wage trends are narrowing the rising consumer prices.”
Claim your pension about one month before retiring
The Finnish Centre for Pensions points out that, if you are thinking of retiring, you should claim your pension about one month before retirement.
The upcoming index situation applies in particular if you plan to retire at the turn of the year 2003-2004. As a rule, this applies if you were born in or before August 1959.
The index situation applies also if you are planning to retire on a partial old-age pension in 2023 or 2024. As a rule, this applies if you were born in or before November 1962.
You must resign from your employment before your old-age pension begins. If you are self-employed, you don’t have to stop your self-employment. If you draw a partial old-age pension, you don’t have to resign from your employment.
No need to apply for the index increase if you are retired
If you have already retired, your pension will automatically be increased with the earnings-related pension index at the beginning of 2024. In other words, you don’t have to apply for the increase.
Tyoelake.fi pension calculators updated in September
The index changes will be taken into account in the pension calculators at Tyoelake.fi as of September 2023.
The Ministry of Social Affairs and Health will publish the confirmed earnings-related pension indexes for 2024 at the end of October.