Economist says Finland needs pension buffer funds
FINLAND – Finland should establish buffer funds to cover both the country’s growing future state pension liabilities and the healthcare costs of an older population, according to Pentti Vartia, managing director of The Research Institute of the Finnish Economy (ETLA).
“ The good economic development of Finland has made it possible to pay off some of the public debt, lower taxation and increase public spending. Even after this there are extra resources available in the public purse,” Vartia said in his speech yesterday at the publication of the ETLA’s economic forecast for 2001-2005.
He suggests that some of the public surplus is invested in specially set up funds to guarantee the future of the welfare state without raising taxes.
“ The post-war generation is retiring within ten years, but the healthcare costs are not going to rise until somewhat later. At a time when the national economy is healthy, we should start getting ready for major future public spending. Healthcare costs due to ageing should be considered in the same way as pension costs,” says Vartia.
The average retirement age is currently 59 in Finland and a total of FIM86bn (e14.5bn) is being paid in pensions every year.
The majority of pension benefits are paid by private and public pension funds and the basic state pension is paid by the Social Insurance Institution of Finland (KELA).
Last year KELA paid FIM16.1bn, down FIM500m from the previous year, in old age state pensions to some one million pensioners, just under 20% of the total population.