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New Skills Required

Today’s complex realities should show in the design of social protection, argues Anna d’Addio, economist with a long career in the OECD.

d’Addio is pleased that the Finnish pension reform makes the scheme financially sustainable. The praise comes with certain reservations, though. “Statistics show that, on average, people live longer. But healthy ageing is far from true for all. There is huge variation in health and longevity across groups with different socioeconomic backgrounds.”

The risk of poverty in retirement is also a problem, particularly for women and the long-term unemployed. Long parental leaves shorten women’s working life, reduce their earnings and, as a result, affect their pensions. Leave arrangements should re-balance the distribution of care activities within the family to help women advance in their careers.

Pension policies should also take into account that people’s attitude towards work has changed. “People look for more freedom of choice and for solutions that may help them adjust their work to their individual needs,” d’Addio explains. People need to take increasing responsibility for their employability, social insurance and financial planning. “Schools, employers and unions will play a crucial role in helping people build the necessary financial competencies and life and work skills.”

d’Addio concludes that we need new forms of social security. Developing pensions requires a comprehensive approach that takes employment, education and social policies into account.

d’Addio will be one of the keynote speakers at the international conference on pensions in Helsinki in May (Changning Labour Markets, Life-Course and Pensions).

Average

Monthly Pension

1,632 euros

The average monthly pension in 2016 was 1,632 euros (€1,848 for men and €1,453 for women).

Women’s pensions averaged 78 per cent of men’s. The highest pensions were paid in Uusimaa (€1,942) and the lowest in Southern Ostrobothnia (€1,403).

Circa 1,460,000 persons receive a pension in their own right in Finland. Of all persons aged 16 or above, nearly one third (32%) receive a pension. The figures do not include recipients of part-time pensions or persons receiving only a survivors’ pension.

Of the working-age population, circa 6 per cent have retired on a disability pension. This is slightly less than in 2015.

In 2016, a total of 29.7 billion euros was paid in statutory pensions, of which 26 billion euros in earnings-related pensions and 2.5 billion euros in Kela pensions.

Pensions Small in Russia

The fragile pension system in Russia means that most retirees have to work in retirement. The average old-age pension in Russia is RUB 13,500, an ample €220. Disabled veterans and veterans of the Great Patriotic War (1941–1945) receive the highest pensions, around RUB 30,000 (€490).

”Politically, the retirees have not been forgotten”, argues Markku Kivinen, Director of the Aleksanteri Institute. But the faith in the pension system has crumbled among young Russians. ”Nobody can predict what pensions will be like when it is time for me to retire,” explains 27-year-old librarian Savva Eirus-Šulepov. A recent study by NWO shows that as many as 76% of the 18–49-year-olds in Russia believe that they cannot afford to stop working.

The Russian pension system comes with many uncertainty factors. The retirement ages are low: 55 for women and 60 for men. Many of the private pension funds established in 2002 have been forced to close down because of negative returns.

Tax Agreements with Spain and Portugal

The tax agreement negotiations with Spain and Portugal have been completed. As a result, Finland can levy tax on private sector earnings-related pensions paid from Finland to pension recipients living in both these countries.

The agreements are similar in content. Once they have been ratified by the parliaments of the two countries on the Iberian Peninsula, they will most likely come into force in 2018. Thanks to the new agreements, Finland can levy tax on nearly all pensions paid from Finland to Spain and Portugal.

The tax that the pension recipients pay to these countries will be deducted from the tax that is to be paid to Finland. The new agreements cover not only taxes but also the rent income received from or the profit on the sale of a leased owner-occupied flat in Finland.

Both agreements include a three-year transition period.

Translator Lena Koski, Finnish Centre for Pensions.
Translator Lena Koski, Finnish Centre for Pensions.

LENA KOSKI

Translator

Finnish Centre for Pensions

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