Keva’s New Hope
Keva and its new CEO (as of May 2016) Timo Kietäväinen face a major challenge: to ensure that the employees of municipalities will continue to be insured in Keva despite the healthcare, social welfare and regional government reform.
The Confederation of Finnish Industries has suggested that Keva’s insurance portfolio be transferred to private-sector earnings-related pension companies. Kietäväinen points out, however, that “keeping the insurance portfolio in Keva is the best solution both for the insured, the provinces and the political decision-makers.”
Kietäväinen is a professional lobbyist. His first task as the CEO of Keva will therefore be to bring about a political decision which will secure Keva’s position after the reform.
A total of 220,000 social and healthcare-sector employees are likely to transfer from the employment of municipalities to provinces. In addition, Keva estimates that circa 60 per cent of the current municipal-sector employees will retire within the next 20 years.
“If the pension insurance portfolio of more than half of the employees within the municipal sector were to be taken out of Keva, the pressure to raise the pension contributions would be considerable,” Kietäväinen sums up.
Keva’s successful investment operations contribute to keeping the contribution levels reasonable. It manages the largest earnings-related pension fund in Finland (worth EUR 45 billion at year-end 2015). “Keva is part of the public sector, so we have to uphold strict ethical investment criteria,” Kietäväinen promises in relation to the upcoming reform of the corporation’s investment principles.
Underinsured self-employed persons are the rule rather than the exception. On average, Finnish entrepreneurs earned EUR 27,100 in 2014. The confirmed income that the pension and other social benefits are based on amounted to EUR 18,700. Men’s confirmed income amounted to 63 per cent of their earnings, women’s to 79 per cent.
Irmeli Ahola, owner of a second-hand shop selling Finnish design ceramics and glassware , is not surprised by these figures. Yet she is an exception to the rule. In addition to her statutory pension insurance, she has accrued pension from previous employments and has taken out voluntary pension insurance.
In 2014, the average working life of entrepreneurs was 39 years, two years longer than for wage-earners. In this respect, Ahola is a typical entrepreneur. Having passed the earliest retirement age, she is now ready to let go of her Tapio Wirkkalas and Kaj Francks and retire.
How to measure pension adequacy?
The Retirement Adequacy Model (RAM) has been developed by the International Social Security Association (ISSA) to measure the adequacy of pension systems through seven parameters.
The overall pension adequacy in Finland is at a good level when examined with RAM.
The strengths of our system lie in its nearly universal coverage (parameter 7) and administrative adequacy (3). The exit from the labour market and the flexible retirement ages (2) are also in order.
The weakest parameters in the Finnish pension system concern intergenerational equity (5) and benefit levels (1) measured through replacement rates.
The remaining two parameters concern the interaction with other retirement provision (4) and the security of adequacy (6).
The standardised parameters used in RAM provide a good basis for an international comparison of pension systems.
Average Monthly Pension EUR 1,613
The average monthly total pension in 2015 was EUR 1,613 (EUR 1,829 for men and EUR 1,434 for women). Women’s pensions averaged 78 per cent of those of men.
Circa 1,440,000 persons receive a pension in their own right in Finland. Of all persons aged 16 or above, nearly one third (31.7%) receive a pension.
Of the working-age population, 6.4 per cent have retired on a disability pension.
"The number of retirees on a disability pension has decreased clearly,” says pleased Tiina Palotie-Heino, Statistics Manager at the Finnish Centre for Pensions.
In 2015, a total of EUR 28.3 billion was paid in statutory pensions, of which EUR 25.3 billion in earnings-related pensions.
The data is per year-end 2015 and based on joint statistics of the Finnish Centre for Pensions and the Social Insurance Institution of Finland.
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