Total pension €1,762
The average monthly pension of Finns was €1,762 in 2020. In real terms, it has risen by an ample €200 in one decade. Men received an average monthly pension of €1,983 and women €1,579. In real terms, the monthly pension has risen by an ample 10% or €220 in one decade.
Despite the steady growth, one third of the pension recipients received a monthly pension that was less than €1,250. A clear majority of them were women. 8% received a monthly pension of more than €3,000. A clear majority of them were men.
On average, men retiring in 2020 received a monthly pension of the same size (€2,100 in 2019) as male baby boomers and men slightly younger than that. Women’s new monthly old-age pensions (€1,600) were larger than those of older women. Those aged 80 or older received clearly smaller pensions.
“For a long time, new retirees on an old-age pension tended to receive higher pensions than their predecessors. Now that the life expectancy coefficient cuts starting pensions, the gap has narrowed”, explains head of statistics Tiina Palotie-Heino (Finnish Centre for Pensions).
Pension accrues from early age
In connection with the 2005 pension reform, the age when pension starts to accrue dropped from 23 to 18 years. Since the 2017 reform, pension accrues as of age 17 (or 18 for the self-employed). In Finland, much attention has been paid to the young who are outside the education system and the labour force. Less attention has been paid to how much the young work.
According to a recent study by the Finnish Centre for Pensions, about 76% of the 19-year-olds and more than 80% of the 22-year-olds work (in 2019). The 18–22-year-old work clearly more than the 17-year-olds. However, their earnings are relatively small.
Of the 18–22-year-olds with earnings, the earned median monthly pension was €47. The average was €57. Those who had earned the most had accrued a monthly pension of €185. That means that a small percentage of the young have clearly benefitted from the pension reforms.
Young women work more often than young men. The young immigrants work clearly less often than those of the original population. They also have the lowest annual earnings.
Exceptional investment year
The Finnish earnings-related pension system’s nominal average investment return in 2020 was 4.8% and, despite the year of the corona pandemic, the pension investment assets rose to €223 billion.
At year-end 2020, the investment assets of the earnings-related pension system in Finland were divided as follows: 52% in listed shares and share-like instruments (up by 2% from 2019), 32% in money-market investments and interest-bearing instruments, 9% in real estate and 8% in other investments (incl. hedge funds).
One fourth (25%) of the investment assets were in domestic objects while slightly less than one fifth (17%) were in objects within the euro area. The main part (58%) of the earnings-related pension system’s investment assets were in objects outside the euro area.
In the review period 1997–2020, the average return of the Finish pension insurance investors has exceeded the baseline projections. A sufficient average long-term return improves solvency, thanks to which our pension system can weather crises on the financial markets.
Pension for insured work
Pension accrues only for insured work. That is why the self-employed, also those who are self-employed on the side, must take out insurance for their self-employment and keep their pension-declared income up-to-date.
‘Light entrepreneurs’ who operate without a Business ID and who use an invoicing service are also subject to the Self-employed Persons’ Pensions Act. Such entrepreneurs include, among others, artists, journalists, photographers and translators. They must take out their own pension insurance.
The pension record shows what one’s pension accrual is based on. Pension earned for self-employment accrues on top of pension earned for work done in an employment relationship.
Check your pension record via your pension provider’s website or tyoelake.fi.