FINLAND – Finnish labour organisations have reached a last-ditch agreement on reform of the country’s first-pillar TEL pensions system, although some confusion remains as to the exact nature and timing of some of the proposed reforms.

The Finnish government had threatened Finnish social partners that if they could not agree on the changes to issue such as retirement age and pension calculation then the government would take the decision out of their hands.

However, Eero Sipila, managing director of Helsinki-based consultants Porasto, says agreement was reached by the labour parties as to what kind of changes there should be in the TEL system concerning early retirement and also unemployment contributions.
“They were also discussing what should be the retirement age in the future. The idea is that there should be a flexible age for retirement, so could you could retire between the ages of 63 and 68, but the level of pension will be higher the later you retire.”

But he notes that there were mixed feelings over whether the calculation of retirement benefits should be based on final salary or smoothed over a career.
“There was a mixed agreement on this and there will be a period of trial from 2005 to 2010 during which there will be new negotiations and thinking on the way to calculate this.”

He adds that the process of changing Finnish legislation is just starting though: “Of course this requires changes in the law and so on, and those have not been made. We don’t know what the parliament’s reaction will be, but it is unlikely that they will change anything that has already been decided.”

Sipila says it will take some time though for a government decision: “The first decisions on early retirement should be enforced from the beginning of 2003, but the other issues require a lot of time in preparing the legislation, so I really don’t know how long it will take.”

The current legal pension age in Finland is 65, but it is possible to take early retirement at 60
It is expected that the penalty for retiring early will be increased under the new plans. Pension calculation normally starts at 23 years of age and the legislation also envisages a lowering of this age level.