Average Finnish old-age pension totals rise by 10% in 9 years

The average total pension of Finnish old-age pension recipients grew by 10 per cent between 2010 and 2019, according to a report by the Finnish Centre for Pensions (ETK).

The report, titled Pensions Indicators 2020, noted that the pension level had risen in all pension income categories during the period under review, climbing by €380 for the average member of the uppermost category and by approximately €100 for the average member of the lowest.

The report also noted that the income ratio of all pension recipients and the working population has remained around 50 per cent throughout the period, with ETK attributing this to “development in old-age pensions”.

In 2019, earnings-related and national pensions totalled over €31bn, of which the share of the earnings-related pensions was €29bn and that of the national pensions was €2bn.

The average income of those living in pensioner households was calculated as €21,900 per year, or around €1,800 per month, in 2018, an increase of 6 per cent since 2009.

The number of pensioners whose income dropped below 60 per cent of the median income was 15.4 per cent in 2018, which was 3.6 percentage points higher than the general population but represented a more than two per cent reduction from 2009.

According to long-term projections included in the report, the average pension purchasing power will more than double in the period 2017–2085, meaning that, at the 2017 price level, a pension of €1,600 will rise to €3,600 per month.

However, the report also predicted that pensions growth would be outstripped by earnings growth from 2020, with the ratio of the average pension to average earnings settling at 43 per cent by 2085.

Looking at the cost of pensions, the report noted that pension expenditure had increased since 2009 and the pension expenditure to gross domestic product (GDP) ratio had risen sharply.

In 2018, statutory pension expenditure stood at 13.2 per cent of GDP, with this relative expenditure projected to remain stable until 2030, after which it is slated to decrease to 12.3 per cent by 2045 due to the fact that the growth of average pensions is slower than that of labour productivity.

However, the ratio is then expected to bounce, reaching 15.6 per cent by 2085, as society trends towards retiring later and a growing number of pensioners.

Average contribution rates have already grown from less than 5 per cent to more than 20 per cent between 1965 and 2020, and are projected to further increase to just above 30 per cent by 2085, as pension expenditure climbs throughout the century.

The report said: “The aim of pension policy is to ensure sufficient earnings-related pensions, the financial sustainability of the earnings-related pension scheme and longer working lives. ETK first introduced indicators for the monitoring and evaluation of pension provision in 2013.

“Earnings-related pension indicators provide a perspective on the current status of earnings-related pensions as well as on their realised and predicted development. The collection of indicators is intended for decision-makers and other parties interested in the future development of earnings-related pensions.”

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