Government decides on gradual raising of minimum age for old-age pension to 65

Some taxes to be cut; increases in alcohol taxation in prospect

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The minimum age for an old-age pension is to be raised in stages to 65 years from the present 63.
      The government decided on the issue at a gathering looking into ways to make sure that the state will not run out of funds even after the current economic crisis, which is set to increase state indebtedness.
      The change is to be implemented in increments, raising the age by two months a year from 2011. This means that the intended rise in the pension age will be achieved in approximately 12 years.
     
For the change to be effective as a means of keeping people at work longer, tougher rules will have to be put in place on the scope for taking early retirement.
      However, the government does not plan to take issue with rules on early retirement through unemployment, part-time retirement, and disability pensions until 2013.
      The reason for this is the ongoing recession.
     
At present, companies are reducing staff, with older employees being let go first, and without early retirement or other “softer” methods of dealing with the issue, ageing employees might go straight into the unemployment queue.
      "The present crisis needs to be taken into consideration. Changes in the safety nets need to be made at a stage in which employment levels are already rising”, Prime Minister Matti Vanhanen (Centre) explained.
      However, stricter conditions for various supplementary pensions - for instance, group retirement plans at workplaces - are to be implemented at a faster pace. The lower age limits for group pension insurance and individual pension insurance plans are to be raised “according to the fastest possible timetable” to 65 years, up from the present 60 and 62.
     
Vanhanen admitted candidly that the changes in the pension system are now easier to decide on than when times are good.
      “Crises naturally often lead to a situation in which things have to be viewed as a bigger whole. Naturally, it is now easier to explain it in a way that people can understand”, Vanhanen said.
     
In the view of Minister of Finance Jyrki Katainen (Nat. Coalition Party), the change is not as radical as might appear at first glance.
      “If we manage by having young people starting their studies earlier and getting their degrees earlier, and if people work a normal Nordic career, then things are good”, he said.
      One of the concerns facing Finland as and when the recession lifts is that an increasing number of people in the baby-boomer generation will be leaving the workforce at just the moment when the economy needs labour input and productivity to pay off the likely debt-burden that recessionary conditions will bring (see attached weekly article). Without growth, and without actions being seen to be taken to ensure it, borrowing will become increasingly expensive for the country.
     
Vanhanen said that the government also agreed on a readiness to lighten taxes. However, they will ultimately be linked with incomes policy, which means that in return, the government will want to see moderate pay increases.
      The government also decided on a number of other tax decisions: the tax on alcoholic beverages will go up, and local authorities will be allowed to increase property taxes more than they can now.
      Katainen noted that if state finances are to get out of the red by 2011, an 8% annual growth would be needed.
      “Meanwhile, the bottom of the recession has not yet been passed”, he pointed out.


Previously in HS International Edition:
  Government stimulus measures aimed at halving growth in unemployment (2.2.2009)

See also:
  Warning! Painful Recovery Ahead (24.2.2009)

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