Report calls for nearly 5-year increase in retirement age

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The retirement age needs to be raised, the unemployment-based “retirement tube” eliminated, the conditions for part-time retirement tightened, and the age limit for voluntary supplementary pensions raised, says a report on ageing commissioned by the government and drawn up by the Economic Council of Finland.
     A number of measures have been taken to cope with the prospect of an ageing population, but the report says that more measures are needed.
     “No matter how we look at it, the preparations are not sufficient. Something has to be done”, says Undersecretary of State Vesa Vihriälä of the Prime Minister’s Office.
     
At the present pace, Finland will not cope with the ageing of the population, the report warns. State revenues will not cover expenses, if policy is not changed. This sustainability gap means an immediate and permanent need to raise taxes, or cut spending.
     The gap used to be about one per cent of GDP, or nearly EUR 2 billion on the basis of current figures.
     The ongoing recession has boosted the sustainability gap to 2.5 per cent, with the government borrowing money for economic stimulation.
     
There are three possible solutions to the problem: raising taxes, cutting benefits offered by the welfare state, or enacting structural changes.
     The report urges structural changes. In practice this means having people stay at work for a longer time, greater efficiency in public services, and promoting public health.
     Improved efficiency could be achieved simply by rising to the same level as the other Nordic Countries. Finns aged 55 take part in work less frequently than those in other countries. This especially applies to men.
     At the present rate, the supply of labour threatens to decline by 190,000 people by 2050, but if Finland reaches the level of Finland, Denmark, and Norway in retirement age, the gap would be just 20,000.
     
Incentives to retire are too attractive, according to those drawing up the report. The incentives are seen to encourage people to leave work too soon.
     Vihriälä says that early retirement is a special problem that needs rectification.
     At least the “unemployment tube” needs to be removed, and restrictions need to be placed on the conditions for part time retirement. The unemployment tube means that the jobless who are nearing retirement age are entitled to extended unemployment benefits before being entitled to a pension. The system applies to workers above the age of 57.
     The minimum age for part-time retirement is 58, and for early old-age pension it is 62. Regular old-age pension can start at the age of 63.
     
After the early retirement options are blocked, the Economic Council says that the next step is a re-examination of the retirement ages themselves. Under the proposal, age limits need to be linked with the rising life expectancy in Finland. If working careers could be extended as the life span grows longer, the amount of available labour might even grow.
     
The need for raising the retirement age is calculated at 4.5 years by 2050.
     There is no need to intervene in the level of pensions. The report expresses confidence that Finland will make it through the pension promises that it has made. Pensions are protected by legislation and the investment of pension funds. However, the availability of money for elderly care, health care, and other public services is less certain.


Previously in HS International Edition:
  10,000 Finns will reach retirement age in September (8.9.2008)

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