How to survive the corona crisis?
THE CORONA EPIDEMIC and the related social distancing has led to many regular functions coming to a halt. There is no travelling into and out of the country. Restaurants, hobbies, cultural and sports events have been cancelled. Shopping has been limited to necessities only.
So far, the service industry has suffered the most. With no customers, there is no need for workers. In countries in which people cannot be laid off, unemployment has skyrocketed. In Finland, those who are laid off are still considered part of the workforce. This means that our employment rates look better than they actually are.
The earnings-related pension system quickly became a considerable part of the crisis management package in Finland. The measures were agreed on in tripartite negotiations between labour market organisations and the Government.
Employers’ earnings-related pension contributions have been temporarily lowered by around 2% (until the end of the year). This measure is financed by cutting into the EMU buffer (to a value of €900 million). Businesses whose operations have stopped completely due to the epidemic can postpone the payment of their earnings-related pension contributions by three months at the most.
The above measures will reduce the contribution income of pension providers in 2020 by an estimated one billion euros. The loss will be compensated by raising the employer contributions in 2022–2025.
The financing of the earnings-related pension system is also weakened by the reduced value of pension asset investments. By mid-March, the stock prices had gone down by 30 per cent. This has considerably reduced the solvency buffers of pension providers.
The pandemic is likely to leave a mark in population forecasts. Changes in mortality rates may affect the expected life expectancy. Birth rates may also change. (Analysis by Jaakko Kiander, Director, Finnish Centre for Pensions).
Focus on work ability
WORK ABILITY MANAGEMENT is a service offered by Finnish pension insurance companies to employers. The aim is to reduce the number of new disability pension retirees. Together with their customers, pension providers map out key risks, draw up plans and implement them.
The directors of work ability services of the main pension insurance companies agree that identifying and supporting high-risk employers is crucial.
Pauli Forma (Varma) points out that work ability management is a natural part of pension providers’ basic task of securing pensions. Kristiina Halonen (Ilmarinen) argues that problems must be tackled and prevented as soon as possible. Anu Suutela-Vuorinen (Elo) wants to increase employers’ understanding of work ability management processes.
To achieve results, customer companies must take responsibility for work ability management. Realising its financial impact and seeing it as an important part of the company’s image often motivates employers to invest in work ability management.
Stats on working abroad
WORKING IN SEVERAL COUNTRIES has increased in recent years. In 2019, the Finnish Centre for Pensions granted more than 11,000 certificates of coverage by Finnish social security to workers posted abroad from Finland. A clear majority of the certificates were granted to men.
“Men go abroad to work in Sweden, Spain and Germany. Women tend to work in Spain, Belgium and Germany,” says senior advisor Tiina Ahonen (Finnish Centre for Pensions).
Of the certificates granted to men, 44% were for work in several countries. The equivalent rate for women was 29%.
To be covered by Finnish social security while working abroad temporarily, the posted worker needs an A1 certificate (in EU countries). The posted worker’s employer is advised to apply for the certificate in good time before the posting begins via the online application service of the Finnish Centre for Pensions. Any statutory social security contributions for a worker with an A1 certificate are to be paid to the country that issued the certificate.
Record-high average pension
AVERAGE MONTHLY PENSIONS in Finland rose to more than €1,700 for the first time. In real terms, the monthly pension income has risen by almost 200 euros in one decade.
Average pensions describe the average monthly pension for pension recipients who live in Finland and receive an earnings-related or a national pension (excl. a part-time, a partial old-age or only a survivors’ pension.
In 2019, the average monthly pension was 1,716 euros, nearly 40 euros more than in 2018. The median monthly pension was 1,497 euros. In real terms, the average monthly pension has grown by more than 10% (€200) in ten years.
“Over the past decade, the gender gap in pensions has narrowed by four percentage points,” statistics manager Tiina Palotie-Heino (Finnish Centre for Pensions) explains.
Despite this, women’s pensions lag behind and are, on average, one fifth smaller than men’s.