Dangerous flexibility, a study by Professor Axel Börsch-Supan (Max Planck Institute) on the flexible pension solutions in nine OECD countries, was the topic at a recent research seminar at the Finnish Centre for Pensions.
”Most of Europe’s flexible pension solutions have been inefficient,” Prof. Börsch-Supan stated at the seminar. Although the pension reforms carried out in these nine countries have raised the employment rates of 55–64-year-olds, the number of working hours has gone down or stayed at the same level as before.
As a rule, flexibility has been introduced to make it possible for elderly people to work longer. Yet, failing health is a poor justification for the need for flexibility, Börsch-Supan argues. According to extensive SHARE data, serious health problems are common after age 75.
Director Mikko Kautto (Finnish Centre for Pensions) pointed out that flexibility does not extend working lives as efficiently as does raising the retirement age. Yet raising the retirement age cannot be the only tool when designing a pension reform. The two options are not mutually exclusive: “We also need flexibility since we cannot assume that every person is able to work longer.”
Kautto further pointed out that the reason for the rising effective retirement age in Finland is not flexible retirement ages but the fact the several routes to early retirement have been abolished. It is too early to say how the partial old-age pension introduced in Finland in 2017 will affect the effective retirement age, but of those who have taken out the pension so far, only 40% have either cut down on their working hours or quit working altogether while 60% have carried on working as before.
Subjective Economic Wellbeing of Retirees
The income satisfaction paradox among retirees in Europe means that they are financially more satisfied than the other population groups although their income level is generally lower.
A European comparison by researcher Liisa-Maria Palomäki (Finnish Centre for Pensions) shows that people who retire directly from working life feel that their economic wellbeing deteriorates while those who retire from unemployment feel the opposite. For them, getting a pension means having a stable and continuous source of income.
A surprising result was that, in the countries in Europe where the average income of retirees was higher, retirees were more prone to feel that their income was inadequate, and vice versa.
Security for Grant Recipients
Artists and researchers often have a fragmented working life. Insurance under the Farmers’ Pensions Act has offered security for more than 20,000 grant recipients in Finland already for a decade. The Farmers’ Social Insurance Institution Mela administers the insurance.
Grant recipients are informed of the pension insurance when they are notified of getting the grant. “Many of them expect Mela to take out the insurance on their behalf, but they have to apply for the insurance themselves,” explains insurance team leader Leena Vehkomäki of Mela.
Each grant is insured separately. If the grant recipient is also self-employed, they must take out insurance under the Self-employed Persons’ Pensions Act. If they work in an employment relationship, their employer will take out insurance under the Employees Pensions Act.
Automated A1 Decisions
Robots issue decisions on applications for the A1 certificate for posted employees at the Finnish Centre for Pensions. “This year, roughly one third of the decisions will be issued by a robot,” says development manager Karoliina Nurmi.
In 2017, the Finish Centre for Pensions issued 10,500 A1 certificates. That figure was reached already by June this year. Two thirds of the applications are expected to be submitted online, which speeds up the process. “We issue automated decisions on 25% of the applications. This way, we can focus on cases that are less straightforward,” Nurmi explains.
The social security regulations concerning Kela benefits will be reformed in Finland this autumn. ”We have aimed for clarity throughout this reform process,” says Henna Huhtamäki, Ministerial Adviser at the Ministry of Social Affairs and Health. “Our goal is to get people to think about their social security already when they plan to move abroad,” she explains.