Updated pension calculator takes earnings growth into account

The updated pension calculator takes into account the general growth in earnings in Finland, that is, the change in the average earnings of wage earners. Taking into account the growth in earnings makes the result more realistic. The pension calculator is available at Työeläke.fi, a website for the general public.

The updated calculator includes two alternative developments of earnings growth:

  • no change to the general earnings level, and
  • the general real earnings grow by 1.5 per cent per year.

The previous version of the calculator always assumed that the general earnings-level and the individual’s earnings-level do not change in the future. This alternative can be selected also in the updated calculator and it corresponds to the pension assessment of the pension record.

“When the growth in earnings is taken into consideration in the calculator, the results become more realistic,” says special adviser Suvi Ritola of the Finnish Centre for Pensions.

The assumption of the future growth in earnings used in the updated calculator corresponds to the long-term projections of the Finnish Centre for Pensions. In the baseline projection of the calculator, the real earnings grow by 1.5 per cent per year in the long run.

The impact of inflation (the rise in prices) has been deducted in the real growth of earnings. The real growth of 1.5 per cent means that the wages will grow by 1.5 per cent more than the price level.

General growth in earnings leads to higher pensions

The updated calculator takes into account the growth in earnings in two ways.

First of all, the updated calculator takes into account how the general growth in earnings affects the future pension via the wage coefficient. When the pension starts, the wages and earnings from work throughout a person’s working life are indexed with the wage coefficient to the level of the year in which the pension starts. The wage coefficient ensures that the pension earned throughout one’s working life retains its value. Without the wage coefficient, the pension amount would be more modest.

Second, the development of one’s own earnings is tied to the selected general growth of earnings. In the updated calculator, one’s earnings are assumed to grow each year in line with the wage coefficient.

To illustrate how the earnings grow, the calculator includes information on how much the last wage before retirement will be if the general earnings level grows as projected. In addition, the calculator tells the replacement rate, that is, how much the pension is relative to the wage before retirement.

National pension to those who have turned 55

Contrary to the previous version of the calculator, the updated calculator also shows how much national pension a person who has turned 55 and who has earned no or only a small earnings-related pension is predicted to get. In the latter case, the calculator shows also the total pension (the earnings-related, national and guarantee pensions combined).

The updated pension calculator at Työeläke.fi can be used to estimate the amount of the old-age pension only. The calculator does not calculate partial old-age pensions or disability or years-of-service pensions.

Pension amount in current prices

The pension amount and the wage at the end of working life are presented in current prices, which makes the result easy to relate to current prices. In other words, the user of the updated calculator does not have to take inflation into account.

The calculator estimates the pension based on the wage entered by the customer and the currently valid laws. The result is as exact as possible when the amount of the pension pot earned so far is entered into it. That amount is stated on the pension record.

Go to the pension calculator 

More information

Suvi Ritola, Senior Adviser, phone +358 29 411 2634, suvi.ritola(at)etk.fi