Finnish earnings-related pension reforms are set to come into force from 1 July, aiming to enable pension companies to achieve better returns on their investments, the Ministry of Health, Welfare, and Sports has announced.

The reforms include changes that will allow pension companies to take greater risk with equity investments, while capital adequacy regulations will be relaxed to allow for more investment risk to be taken across all asset classes.

The Finnish government said the increased risk taking would enable the pursuit of better investment returns.

To counterbalance the increased investment risk, financial technology will be updated to allow pension institutions to bear the greater risk.

Additionally, the ability to take out a loan will be expanded to cover all real estate investments of earnings-related pension companies, the Seamen's Pension Fund, pension foundations and subsidiaries of pension funds.

Funding will also be strengthened so allow more funds to be allocated annually for old-age pensions to finance future pensions.

These changes taken together aim to improve the fairness of the pension system, especially for younger generations.

A new index limiter will be added to the legislation, to be implemented from 2030, which will mean earnings-related pensions in payment will not be able to increase by more than average earnings over a two-year period.

The proposals amend the Employees' Pension Act, the Seamen's Pension Act, the Pension Foundation and Fund Act, the Act on the Calculation of the Solvency Limit of Pension Institutions and the Diversification of Investments, and the Act on Employment Pension Insurance Companies.

“Reforming the pension system is part of the government programme of Prime Minister Orpo's government,” the Ministry of Health, Welfare, and Sports stated.

“The aim of the changes to the pension system is to ensure the financial sustainability of the earnings-related pension system and secure an adequate level of benefits.

“The pension reform will strengthen public finances in the long term by approximately €2bn. The impact is 0.8 per cent of gross domestic product, i.e. double the target set for the reform.

“The laws will enter into force on 1 July 2026. However, the entry into force will be staggered so that the amendments to the Employees' Pensions Act and some of the amendments to the Seamen's Pensions Act will enter into force on 1 January 2027.

“The President of the Republic is scheduled to confirm the laws on Tuesday 16 June 2026.”

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