Finland plans to merge private and public pension systems
Written by Natalie Tuck
The Finnish government is planning on merging the country’s private and public pension systems.
Publishing an update on the plans, the Finnish Centre for Pensions (ETK) said the aim is to strengthen the sustainability and risk management of the earnings-related pension system and streamline the definition of disability and the criteria for disability pensions.
The government hopes to finalise a bill legislating for the changes in the current term of parliament. The reforms would see the break up of Keva, the country’s largest pension provider that administers public pensions. One part of Keva would become a new earnings-related pension insurance company, Finnish Pension Alliance chair of the board of directors, Satu Huber, explained.
“To begin with, the new company’s customers would consist of municipalities, municipal federations and other municipal organisations. After a transition period, the company would compete for customers alongside the pension insurance companies Elo, Ilmarinen, Varma and Veritas,”she noted. It is thought this would be complete by 2024.
The aim in the long run is to equalise the pension contributions of the public and private sector. Currently, the municipal pension insurance contribution is four percentage points higher (28.35 per cent) than the private sector contribution (24.4 per cent).
“Combining the systems is really the only way to bring in line the pension contributions of the municipal employers with the private sector,” Keva chief financial officer Allan Paldanius, said.
The chair of the wor¬king group that is preparing the merger, Hannu Iljäs (Ministry of Health and Social Services) stated that the reform is about the sustainability and risk management of the earnings-related pension system.
Varma senior vice-president, actuaries, Pasi Mustonen highlighted that the merger will also streamline the definition of disability and the criteria for disability pensions. Under the current system, municipal workers’ ability to work is assessed in relation to their own profession, while for private sector workers it is assessed in relation to any profession or work. “This is in line with the aim to extend working lives,” Mustonen said.
The working group will present its report on the merger at the end of 2021.