Finland is changing the way retirement ages are determined, with people born in 1965 becoming the first age group covered by a system that links the minimum pension age to life expectancy.
For the 1965 birth cohort, the minimum old-age pension age has been set at 65.
Their so-called target retirement age is 66 years and three months. Remaining in work until that age is intended to compensate for the reduction caused by Finland’s life expectancy coefficient.
The retirement age did not rise at the first annual adjustment.
“Life expectancy has not increased enough for the retirement age to rise at this first review,” Timopekka Hakola, an economist at the Finnish Centre for Pensions, said in a statement.
People born between 1962 and 1964 also have a minimum retirement age of 65.
Retirement age will be confirmed by birth cohort
From the 1965 cohort onwards, Finland’s minimum retirement age will be adjusted according to changes in life expectancy.
The Ministry of Social Affairs and Health will confirm the retirement age separately for each birth cohort.
The age is confirmed when the cohort turns 62 and cannot change sharply from one year to the next.
According to Hakola, the minimum retirement age can differ from that of the previous confirmed cohort by no more than two months.
The minimum age for taking a partial old-age pension will also be linked to life expectancy. It will remain three years below the minimum old-age pension age.
For people born in 1965, this means a minimum age of 62 for a partial old-age pension.
Finland also uses a separate life expectancy coefficient to adjust earnings-related pensions as people live longer.
For those born in 1965, the coefficient has been set at 0.94453. This reduces the amount of a newly granted pension by approximately 5.5 percent.
The coefficient is applied when the pension begins.
For example, a person born in 1965 who has accumulated a monthly earnings-related pension of €2,100 would have that amount multiplied by the coefficient:
€2,100 × 0.94453 = €1,983.51
If the person retires at the minimum retirement age, the monthly pension would therefore be €1,983.51 before tax.
The Finnish Centre for Pensions calculates the coefficient annually, after which it is formally confirmed by the Ministry of Social Affairs and Health.
The effect of the coefficient can be offset by postponing retirement. For the 1965 cohort, working until the target retirement age of 66 years and three months is designed to compensate for the reduction.
The changes are part of Finland’s effort to adapt its earnings-related pension system to longer life expectancy while encouraging people to remain in working life for longer.