The way pension reforms are labelled can significantly shape applications, outcomes and behaviour, according to new research from the Finnish Centre for Pensions (ETK).

Presenting the findings during a recent webinar, University of Bath assistant professor of social policy, Ricky Kanabar, highlighted how seemingly technical changes to retirement pathways in Finland have produced marked behavioural effects.

In 2004, the Individual Early Retirement (IER) pension - available from age 60 for those with mild health conditions - was merged with the Ordinary Disability Pension (ODP), which serves individuals with more serious conditions.

Although the reform left eligibility rules unchanged, relabelling IER into a “stricter-sounding” programme reduced applications by around 1.8 percentage points (37 per cent) and awards by 1.5 percentage points (39 per cent).

The response, however, varied across groups.

Applications fell by 2.5 percentage points among those without tertiary education, compared to 1.8 percentage points overall, while no statistically significant change was observed among tertiary-educated individuals.

Similarly, workers with stronger labour market attachment - measured by private-sector employment at age 57 - saw a 1.5 percentage point drop in applications, equivalent to a 35.8 per cent reduction.

The study also identified evidence of programme substitution, with some individuals bringing forward applications for the part-time pension (PTP).

Meanwhile, registry data indicated little net increase in employment days, suggesting the reform largely shifted exits between programmes rather than extending working lives, one of its original aims.

The authors concluded that labels and social norms played a significant role in shaping early-exit behaviour.

In Finland, workers who had not seen themselves as “disabled” had nonetheless used IER as a legitimate early-retirement pathway; once rebranded, their behaviour shifted substantially.

Kanabar stressed that the findings underlined the importance of anticipating varied responses when designing policy.

“We’re in an era where policymakers are very conscious of the impact of demographic change on ageing societies,” he said.

“If reforms to historic programmes involve relabelling, there may be unintended consequences - and effects will not be consistent across socio-economic groups.”

He warned that effective reform required an understanding of what people in their 50s and 60s are actually doing in the labour market.

“Looking at reforms to the state pension age in the UK, only about one in 10 people adjusted correctly, with the majority still exiting at the same age.

“These reforms can only be effective if people are, to some extent, engaging with them,” he added.

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