SAK approves reform of Finnish pension system from 2017

The other national labour and employer confederations have also approved the settlement, with the exception of the Confederation of Unions for Professional and Managerial Staff in Finland (Akava), but the decision of this organisation to withhold its support will not obstruct the reform.

The new pension system will take effect in 2017 with a phased increase in the normal minimum retiring age to 65 years. Employees who have spent many years in physically or mentally demanding work will nevertheless be able to retire at 63 years. A facility enabling part-time retirement before reaching the minimum age will also continue.

SAK also believes that pensions will become more equitable when future pension eligibility accrues more steadily throughout the working career.

“Protecting the future pensions of the present younger generation was a key objective for SAK. We were also equally concerned to ensure a respectable retirement path for older employees,” SAK President Lauri Lyly stressed after the meeting of the Executive Board.

The national labour and employer confederations have been negotiating the pension reform with Finnish government representatives since the start of the year. The final decision to implement the settlement will be taken by the incoming Parliament following elections in 2015.

The new Finnish pension system

Minimum retiring age rises to 65 years

• The normal minimum retiring age will increase from 63 to 65 years by 2027.
• Beginning in 2017, the retiring age will rise by 3 months every year.
• The maximum retiring age will rise correspondingly to 70 years.
• This increase in age limits will not affect people born before 1955, who will continue to retire when aged between 63 and 68 years.

Pension will accrue at a rate of 1.5 per cent of pay

• Earnings-related pension will accrue at a rate of 1.5 per cent of pay from the age of 17 years.
• A deferment increase of 4.8 per cent of the previous annual pension accrual rate will also apply when an employee continues working after reaching the minimum retiring age.
• The pension accrual will be based on the employee’s total pay, and will no longer exclude the employee’s earnings-related pension contribution element.
• Under a transitionary provision applicable between 2017 and 2025, pension will accrue at a rate of 1.7 per cent of the pay of employees aged between 53 and 62 years.
• The earnings-related pension contributions payable by employers and employees will increase to a total of 24.4 per cent by 2017.

Employees in demanding work will be able to retire at a younger age on career pension

• Employees in physically or mentally demanding work will already be eligible for old-age pension at the age of 63 years.
• An employee in demanding work will require a working history of not less than 38 years to be eligible for such retirement.
• Up to 3 years of maternity, paternity and parental leave may be included in this working career.
• The application for career pension will have to be submitted no later than one year after employment ends.
• The requirements for retirement on career pension will include a statement from the occupational health service.

Partial early retirement will be possible before reaching the minimum age

• Partial early retirement pension will replace part-time retirement.
• Employees aged not less than 61 years will be able to claim 25 or 50 per cent of the old-age pension earned.
• Pension claimed in advance will be subject to an early claim deduction of 0.4 per cent for each month of prematurity.
• The minimum age limit for partial early retirement will rise to 62 years in 2025.

Unemployed workers approaching retirement age will be eligible for an extended period of earnings-related unemployment benefit

• “Additional days” of unemployment benefit will continue under the new pension system.
• Instead of the normal 500-day benefit period, a person aged 61 years or more who becomes unemployed will be eligible for earnings-related unemployment benefit until reaching the minimum retiring age.
• An assessment will be made in 2019 to determine whether the minimum age of eligibility for additional days can be increased to 62 years at a later date.

Improved quality of life at work

• Employers will be required to arrange work primarily in a manner that provides part-time work opportunities to employees taking early retirement.
• A long-term pay subsidy will be introduced for the elderly.
• Better account will be taken of the rehabilitation needs of jobseekers.
• The range of treatments eligible for psychotherapy compensation will be broadened.

The impact of the pension system will be monitored regularly

• From 2027 the national labour and employer confederations and the government will monitor career development and the economic and social impact of the pension system at five-yearly intervals.
• This review will consider the working career ratio, meaning how much of the average increase in life expectancy is spent at work.
• The minimum and maximum retiring ages may be revised if necessary with a view to keeping the ratio of working career to retirement years at not less than the 2025 level.
• The retirement age may be increased by no more than 2 months annually.