Will the Gender Gap Narrow?
THE GENDER GAP IN PENSIONS persists. In Europe, women’s pensions are nearly 40% lower than men’s. Experts at an international research conference at the Finnish Centre for Pensions on 18 May looked for solutions to this problem.
Prof. Francesca Bettio (Univ. of Siena) pointed out that if women’s employment rates would improve, the gender gap in pensions would narrow. ”Measured in working years, women in the EU have shorter working lives than men.” Although women are slowly catching up in terms of working hours, the development might go in the opposite direction: “If part-time work among women continues to rise, the gap will widen.”
Prof. Katja Möhring (Univ. of Mannheim), showed that, in many western countries, motherhood still weakens women’s pensions. The lower pensions of mothers are mainly due to their weaker wage level compared to childless women. This weaker wage level speaks of the so-called ‘maternity penalty.’
Assoc. Prof. Rense Nieuwenhuis (Stockholm Univ.) calls for better family policies in Europe. “In most countries, family policies are still based on the assumption that the man is the primary breadwinner of the family. When family policy takes into account both adults in the family, women’s employment rates, wage development and pensions will take steps in the right direction and improve,” Nieuwenhuis comments.
Sr. Researher Kati Kuitto (Finnish Centre for Pensions), presented preliminary results from ongoing research on how parental leaves affect women’s pensions. Altough men and women have accrued equally long working lives by the age of 36, women’s average earnings are only 70 per cent of men’s.
200 Billion Euros
NET INVESTMENT ASSESTS of the earnings-related pension system amounted to nearly €200 bn at year-end 2017. A total of €2.2 bn were paid as pension contributions into pension funds while €4.0 bn were paid out as pensions. This was the 4th year in a row that the amount paid out exceeds the amount collected.
Pension providers can invest a maximum of 65% of their investment assets in equities. At year-end 2017, such investments accounted for 53% of all investment assets, up by 2.6 percentage points year-on-year. The growth was mainly due to positive appreciation.
When reviewing the success of investment returns, the most essential part is how successful the long-term investment operations have been. From that perspective, the growth of pension assets goes hand-in-hand with economic growth and inflation. Pension providers have reached the long-term goal of a 3.5% real return on pension assets.
ARTIFICIAL INTELLIGENCE (AI) can be used to make the customer service experience easier, faster and more efficient. At the Finnish Centre for Pensions, instead of commissioning a ready product, we took part in the development of our own machine learning solutions.
Based on register data, AI managed to identify four out of five retirees on a disability pension already two years before they retired. “Artificial intelligence will play a significant role in future preventive work,” explains mathematician Jarno Varis (Finnish Centre for Pensions).
AI can also be trained to assist our experts, for example our researchers: “The machine can find links in data that we humans have not even thought of,” Varis envisions.
Development manager Virpi Rautiainen (Finnish Centre for Pensions) points ut: “When customer service chatbots can communicate with each other, customers can be served at one service point instead of being referred to several.”
Health Care Too Expensive for Retirees?
HEALTH AND SOCIAL SERVICES
provided by the public sector form a considerable income transfer for retirees, but the high customer fees make retirees struggle.
On average, public health and social services cost €6,500/pers./year. The out-of-pocket fees cover 13% of the costs. Tax-funded services are a major income transfer, in particular for low-income retirees. They are also the ones who struggle the most with high out-of-pocket fees.
The highest fees relate to long-term institutional care: for a single person, the fees can be up to 85% of their income. This is a problem not only for elderly retirees but also for young disabled people who cannot work.
Senior researcher Maria Vaalavuo (National Institute for Health and Welfare) is worried that, soon, Finland will not qualify as a Nordic welfare state. Social policy specialist Tarja Pajunen (The Central Association of Finnish Pensioners) points out that, in addition to reduced customer fees, retirees need guidance. Applying for assistance is too complicated.