Thrifty rural pensioners make ends meet

RETIREES IN RURAL AREAS struggle with making ends meet more than do those in urban areas in Finland. A recent survey made by the Finnish Centre for Pensions also examined the retiree’s perceived economic well-being. The survey shows that, despite having a clearly lower income, rural retires are not less satisfied with their lives than urban retirees.

The income varies greatly between urban and rural areas. Every fifth rural but only every tenth urban retiree is a low-income person (monthly income less than €1,000). Two out of five rural and one out of three urban retirees state that they have no money left after covering necessary expenses.

In addition to a low income, high costs make it difficult for retirees to make ends meet. More than one in three rural and one in four urban retirees struggle to cover housing and medicinal costs. “Health and related expenses should be taken into account more when examining the economic well-being of retirees,” argues Susan Kuivalainen (Head of Research, Finnish Centre for Pensions).

The regional differences in the perceived economic well-being are clearly smaller than might be expected based on the income differences. Two out of five rural and one in three urban retirees perceive their financial satisfaction to be low. “In practice, making a living on a lower income is easier in rural than in urban areas. The underlying reasons may be a greater self-sufficiency in rural areas and different consumption habits”, economist Satu Nivalainen (Finnish Centre for Pensions) explains.

Despite shortages in economic well-being, the life satisfaction of rural retirees is at an equal level with that of urban retirees. Retiree’s average life satisfaction is 7 (scale: 0-10). Certain factors, such as homeownership, increase life satisfaction among rural retirees and compensate for their lower income.

The young and pensions

A GOOD SECURITY SYSTEM. That is how 25-year-old law student Tiina Forss (Univ. of Lapland) defined the Finnish earnings-related pension system after taking a first and closer look at her pension record.

The pension record taught Forss a great deal. She learned the name of her pension provider and how much pension she has earned so far. Using the pension calculator at Työeläke.fi, she was able to estimate her future pension amount (based on the average salary of a female lawyer).

Forss also discovered that the 20% lower earnings for female lawyers compared to male lawyers will show in her future pension amount.

Forss was surprised to find out that pensions cannot be drawn at any age. Fortunately, however, the partial old-age pension offers the possibility of flexible retirement.

To conclude, Forss finds the Finnish pension system to be a good security system that should be viewed as insurance rather than an investment.

Leader of new era

THE NEW MANAGING DIRECTOR of the Finnish Centre for Pensions, Mikko Kautto, believes in transparency and clear communication. “We have to be able to explain and justify the basic features of the Finnish pension system in a way that ordinary citizens can understand,” he says.

Kautto stresses the importance of highlighting the best features of our pension system. “From the citizens’ point of view, our pension system is incredibly simple and straightforward. People don’t have to keep track of all their employments, salaries and insurers and they don’t have to worry about losing earned benefits.”

The vision of the Finnish Centre for Pensions – Pension expertise at your service – holds true in decision making. Kautto highlights the importance of participating in pension policy discussions: “Our operational environment expects us to contribute to discussions with research-based data,” he says. “Although we don’t talk politics, we cannot stay at the periphery of pension policy.”

Well-being more than pensions

PENSION ADEQUACY was the topic of the international conference Pension Adequacy in Europe – Today and Tomorrow, arranged by the Finnish Centre for Pensions.

Katarina Ivanković Knežević (European Commission) stated that the Commission takes a holistic approach to pension adequacy. In addition to labour markets, pensions relate to education, health, immigration and ­social equality. “The value of the Pension Adequacy Report is the cooperation it takes to produce it every third year,” Ivanković Knežević argued. She concluded: “We cannot emphasize pension adequacy enough. People have the right to an income, a pension, in old age. This is reason enough to develop pensions.”

In his closing remarks, Rait Kuuse (SPC) argued along the same lines: “We all grow old and want well-being in old-age. Pensions guarantee that.” He further pointed out that “the question of pensions is not just about old age. Increasingly it is about the well-being of citizens in a wider sense.”

Lena Koski
Lena Koski



Finnish Centre for Pensions

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