Finnish pension reform to increase deferred retirement ‘successful’ – ETK

Pension reform introduced in 2017 in Finland has “successfully achieved” its goal to increase the number of workers deferring their retirement, the Finnish Centre for Pensions (ETK) has stated.

The number of employees deferring retirement and working after the age of 63 has increased “significantly”, particularly for those working in the private sector.

Focusing on people born between 1954 and 1957 who have retired on an old-age pension, ETK noted that the lowest retirement age was 63 years old for those born in 1954, and 63 years and nine months for those born in 1957.

More than half (55 per cent) of people born in 1954 retired before turning 63 years and nine months, while almost all (97 per cent) people born in 1957 will retire after turning 63 years and nine months old.

“The change has been notably larger in the private than in the public sector since nearly 70 per cent of those born in 1954 who worked in the private sector retired before turning 63 years and nine months,” said ETK economist, Satu Nivalainen.

For those in the public sector, between 40 and 50 per cent had a higher individual retirement age than the lowest retirement age, which ETK said seemed to steer the transition to retirement.

Working lives were also found to have been extended due to the rising retirement age, but at a slower pace than the rate at which the retirement age rises.

“This is significant particularly in the private sector since, following the 2005 pension reform, the effective retirement age did not rise and the working lives of 63–68-year-olds did not extend at all in the private sector,” Nivalainen explained.

“In this respect, the 2017 pension reform has successfully raised the effective retirement age.”

While the retirement age in Finland has increased by three months per age cohort, ETK found that a larger share of a cohort had retired at a later age than the previous cohort.

Furthermore, the share of people retiring at the age of 65 or older has increased.

ETK senior researcher, Ilari Ilmakunnas, noted: “The corona pandemic may have affected the timing of retirement, which makes it more challenging to assess the effects of the 2017 pension reform.”

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