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Retirement on a disability pension has decreased clearly among people aged between 50 and 60 years. This is evident when examining the development by successive age cohorts. A study by the Finnish Centre for Pensions shows that full disability retirement has decreased over a longer period of time. At the same time, retirement on a partial disability pension has also decreased as of the cohorts born in the early 1960s.

Senior Researcher Mikko Laaksonen from the Finnish Centre for Pensions reviewed the changes in the incidence of disability retirement for people aged 50–63 by birth cohort.

What new insights does this study bring to research on disability retirement?

Retirement on a full disability pension has declined among the over-50-year-olds as of the beginning of the 2000s. As for retirement on a partial disability pension, it increased in popularity until 2019, after which the increase has levelled off.

Reviewing changes in disability retirement by birth cohort offers new perspectives to understanding these changes.

For example, later-born age cohorts may be healthier than earlier-born cohorts and may therefore retire on a disability pension less frequently or at an older age than earlier-born cohorts.

If this is the mechanism affecting changes in disability retirement, the differences between different calendar years only reflect the differences in disability retirement of different birth cohorts.

What did the review of disability retirement by birth cohort reveal?

Retirement on a disability pension has declined strongly among the 50–60-year-olds as of the 1953 birth cohort. For full disability retirement, the development is similar to that for any disability retirement.

However, in the case of partial disability retirement, the incidence rate increased from those aged 57 to those born in the early 1960s but has fallen since then.

Particularly for those aged over 60, retirement on a partial disability pension has continued to increase. However, it is not yet possible to follow the youngest age cohorts into old age.

Based on this study, what can we assess of the future development of disability retirement?

In younger age cohorts, retirement on a disability pension is clearly less common than in older age cohorts at the same age. This applies to both full and partial disability pensions.

The average disability retirement age has risen for people over 50. To some extent, younger age groups may thus reach the same probability of disability retirement before age 63 as older age groups.

Yet it seems that the share of new disability pensioners among younger age groups will not be as high as among older age groups.

What’s the insight into the development of disability retirement for over-60-year-olds based on this study?

It’s noteworthy that retirement on a partial disability pension has decreased also among the under-60-year-olds. Partial disability retirement continues to increase among those aged 60 and over, but this increase would have to remain substantial for the total number of partial disability retirements among young age cohorts not to fall.

Following the 2017 pension reform, the old-age retirement age rises. This factor also contributes to changes in disability retirement among the over-60-year-olds. The retirement ages are higher for the younger than the older age cohorts.

How does disability retirement in the private sector differ from the public sector?

Full disability retirement has decreased in both sectors but clearly more strongly in the private sector. The decline in partial disability retirement applies to both sectors, but in the private sector, it is more prominent in the younger age cohorts.

The sectors differ clearly regarding the frequency of full and partial disability retirment. Different criteria regarding disability, differences in the experience rating model, line of business and occupational structure and, for example, the occupational and individual retirement ages of the public sector may affect this.

The study “Incidence of disability retirement among persons aged 50 and over by birth cohort” was published in the new series Finnish Centre for Pensions, Analyses.

Finnish Centre for Pensions – Central body of and expert on statutory earnings-related pensions