Regional differences and the future demographic development must be carefully considered in the future social welfare and health care (SOTE) reform.
Lead Specialist Timo Aro (Consultancy for Regional Development MDI) highlights four issues that Finland must deal with: a declining birth rate and reduced number of children, a rapidly growing share of older people, a declining number of working age people and increasing domestic migration.
According to MDI, the population will continue to grow in stronger and the weak gradually wither. Areas of growth and areas of decline can no longer be squeezed into the same mould”, Aro states.
Although the future dependency ratio could be improved by increasing incentives for having children, work-induced immigration must grow. In recent years, net immigration to Finland has been 15,000 persons per year. According to Aro, it must rise to 25,000–30,000 in order for the ratio between the working age population and the rest of the population to remain in balance.
Low birth rates and pension financing
Director of Research Venla Berg (Population Research Institution) points out that the decline in the Finnish birth rate is mainly due to three things: people having children at an increasingly older age, people having only one or two children, and an increasing number of people wanting to be childless.
Improving the birth rate in Finland requires changes in working life and more child- and family-friendly public policies. For example, family leaves should not be considered risk factors in terms of career advancement.
Finland’s fresh child strategy, prepared by a parliamentary committee, is to do just that. “The strategy aims to promote the wellbeing and rights of children,” explains the committee’s secretary general Johanna Laisaari.
The unfavourable demographic development also affects the pension system. There is no imminent pressure to raise pension contributions, but in the long run, low birth rates strain pension financing as the working age population continues to shrink in number, argues development manager Heikki Tikanmäki (Finnish Centre for Pensions).
affects pension system
The growth of the expected life expectancy has slowed down in Finland and other developed countries particularly in the last decade. The development of the mortality rate greatly affects the end-result of pension projections.
Eurostat (Europop 2019) projects that the growth in life expectancy for both men and women in Finland will decrease at a slower pace than projected by Statistics Finland during the period 2019–2070. This would slow down the rise of the retirement age and improve pension benefits compared to the baseline projection.
If the mortality rate remained at the 2019 level, as projected by Eurostat, the old-age pension retirement age of persons born in 2000 would not rise to above 68 years, as projected in the baseline projection of the Finnish Centre for Pensions but stay a few years below that. The average pension relative to the average wage in 2085 would be a few percent higher than assessed in the baseline projection while the statutory pension expenditure relative to GDP would be a few percent lower than in the baseline projection.
of last provider
Since the implementation of pensions is decentralised in Finland, cooperation between pension providers and shared IT systems are essential. Without them, the conditions required for the principle of last provider (that customers are served by the pension provider they were last insured in) would not exist.
Director Katri Raatikainen (Finnish Centre for Pensions) works to ensure that the registers and online services of the Finnish pension system function. “Customers must be able to go online and instantly find the information they need. To maintain their trust in the pension system, they must get coherent information even if their pension provider changes”, Raatikainen explains.