In the Finnish earnings-related pension system, pension accrues from almost all gainful employment. For an individual employee, a longer career therefore means a better pension. A long career is the cornerstone of adequate pension provision. This holds for self-employed persons, too, because earnings-related pension also accrues from entrepreneurial activity.

A longer career offsets the impact of the life expectancy coefficient

The Finnish earnings-related pension system uses a life expectancy coefficient to ensure that the financing of the pension system can cope with the ever longer life spans. The coefficient reduces monthly pensions as people live longer but, on the other hand, pensions are then paid for a longer time. The life expectancy coefficient was applied to pensions for the first time in 2010 and it concerns everyone born in 1948 or thereafter.

Every ten years, the life expectancy of Finns increases by a couple of years. The current prediction is that half of the girls born this year will live to be 100 years old. Population forecasts involve uncertainty, but so far the increase in life expectancy has almost always been underestimated.

Since the life expectancy coefficient reduces future earnings-related pensions, longer careers are needed to offset the decrease in the level of pension provision. When some of the extra years are used for working, the level of earnings-related pensions will remain sufficiently high regardless of the impact of the life expectancy coefficient. Here it is helpful that our system has a flexible age for retiring on an old-age pension, between 63 and 68 years. Moreover, working after the age of 63 years increases the pension more than working before that.

The Työeläke.fi site has more detailed information about the life expectancy coefficient and its impact.

Employment is a prerequisite for a functioning earnings-related pension system

A long career is the best guarantee for an adequate earnings-related pension. The earnings-related pension system guarantees the accrual of pension from all work. However, this requires, among other things, that there are enough jobs in Finland and that employees’ skills and work ability remain as good as possible throughout their careers. Thus, the functioning of the earnings-related pension system depends on work. In consequence, it is important for the pension system that new growth and new jobs are created in Finland.

From the viewpoint of extending careers, it is important to influence issues such as:

  • Young people can commence their studies quickly and can find work after their graduation
  • There are more jobs for ageing people
  • Competence develops throughout the career
  • The employment rate improves
  • The number of disability pensions drops and they start at a later age
  • Whose work ability is 100 per cent? More opportunities for part-time work
  • Well-being and coping at work are considered at workplaces
  • The earnings-related pension system encourages people to continue working.

The earnings-related pension system has limited possibilities of influencing these issues. In consequence, all actors at every level of society must seize the opportunities for extending careers. This is a national project for ensuring future well-being.

See page ‘Earnings-related pension provision’ for more detailed information about the accrual of pension.