Call for pro-family policies
LOW BIRTH RATES cause a pronounced pressure to raise the earnings-related pension contribution rate in Finland in the long run. This is evident in the recently published long-term projections (LTP) of the Finnish Centre for Pensions (published in English later this year). The long-term projections show where earnings-related pensions are heading and offers a way to influence their future development.
According to Statistics Finland’s population forecast of November 2018, the number of young people has dropped dramatically. Senior statistician Markus Rapo (Statistics Finland) asks: “If the low birth rate has become a new norm, how are we to guarantee intergenerational fairness in, for example, pensions?”
The future looks considerably more bleak than in 2016, when the previous LTP was published. “The pension financing outlook is rather stable for the next few decades. The low birth rates should be taken seriously, though. Now is the time to think about how to influence the demographic development,” states development manager Heikki Tikanmäki (Finnish Centre for Pensions). If the dependency ratio is not improved, the pension contribution will exceed 30% of wages towards the end of the projection period (2019–2085). Employment, growth in earnings and investment returns also play a crucial role in this context.
Despite the unexpected drop in the birth rate, there is no cause for major panic. Research professor Anna Rotkirch (The Family Federation of Finland) argues: “We need to discuss the actual employment rates of the different population groups and how we can secure public services and tax revenues even though the share of the working-age population has decreased.” She believes the problem can be tackled through digitalisation and immigration.
Grand old man
40 YEARS IN THE FIELD have made Jukka Rantala, retiring managing director (Finnish Centre for Pensions), one of the grand old men in the field of pension insurance in Finland and abroad.
He has held managerial positions at, for example, the Ministry of Social Affairs and Health (1983–1992) and the Federation of Finnish Insurance Companies (1998–2001). During his leadership (2001–2019), the Finnish Centre for Pensions has strengthened its role as a developer, expert and service producer of earnings-related pensions.
Rantala has left his mark on the 2005 and 2017 pension reforms as the chair of the pension reform negotiation group. As a man of action, he has enjoyed getting things done. “Solving complex – and easy – problems gives me great pleasure. I like it when the pieces fall in place.”
Rantala will retire at the end of May 2018. Director Mikko Kautto (Finnish Centre for Pensions) has been appointed his successor.
Disability – not by way of information
INSURANCE PHYSICIANS and their decisions often elicit strong, negative feelings in people. Newly retired insurance physician Jukka Kivekäs (Varma Mutual Pension Insurance Company) strives to make the work of insurance physicians more transparent.
People who apply for a disability pension genuinely feel that they are unable to work.
“The task of the insurance physician is to find out how much of that feeling is based on an actual disease”, Kivelä explains, “and not, for example, on degeneration that comes with age”.
Kivekäs is pleased about the growing investments and interest in vocational rehabilitation, the primary alternative before retirement on a disability pension in the earnings-related pension scheme.
In 2018, Varma issued 3,500 rehabilitation decisions. Three out of four (76%) of its rehabilitees return to working life.
THE SELF-EMPLOYED often underinsure themselves. This affects not only their future pension but also their other social security.
Pension insurance for the self-employed is based on the earned income determined by the self-employed themselves. It should correspond to the wage paid to a professional doing the same work.
In 2017, the average determined income of the insured self-employed was 22,600 euros, which is over 10,000 euros less than their actual average income from self-employment.
A working group of the Ministry of Social Affairs and Health suggests that a calculator be developed to make it easier for the self-employed to determine their earned income.
The calculator would take into account the general earnings-levels in various fields, the extent of the entrepreneurship and the taxable income from self-employment.
The working group further suggests that the level of the confirmed income set by the self-employed be monitored regularly by the pension providers.