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Finland mulls reforms

The Finnish government and labour market organisations are evaluating reform proposals made by two working groups aiming to identify ways of increasing working life and raising the retirement age. The working groups were set up after the agreement between social partners and the government in March 2009 to increase the average expected retirement age by three years by 2025 using the 2008 figure of 59.4 as a starting point.

The first of the groups, led by Jukka Ahtela, director for legislation and trade policy at the Confederation of Finnish Industries (EK), has outlined proposals to improve well-being at work and tackle high rates of youth unemployment and disability pensions through reforms in occupational health care and education. The other group, led by Jukka Rantala, director of the Finnish Centre for Pensions (ETK), focused on reforming the regulatory framework so that the average effective retirement age would gradually increase. In 2009, the average effective retirement age in Finland was 59.8 years.

Ahtela's group submitted its proposals to the government in February. Rantala's group, however, did not submit its proposals because trade unions and employer representatives failed to reach an agreement on an increased retirement age, as well as the benefits for older employees made redundant before their retirement. The ‘unemployment tube' is a system under which workers approaching retirement who lose their jobs are entitled to receive income-linked unemployment compensation longer than the standard maximum of 500 days, mostly paid by employers. The system prevents an unemployed older person from experiencing a drop in income between the end of income-linked unemployment benefits and the start of retirement.

After evaluation, six working groups in different ministries will start finding ways to put the proposals into practice by January 2011.

Rantala told IPE that the disagreements between the representatives of trade unions and employers focused mainly on the payment of unemployment benefits for older workers. Because of the disagreement, the group could not even begin to discuss the other dimensions of increasing retirement age. "The Central Organisation of Finnish Trade Unions (SAK) opposed the removal of the so-called unemployment tube while the EK on the employer side, wanted to remove the right to extra days. The negotiations were very challenging because there was no common ground," Rantala said.

Lauri Lyly, president at SAK, who was a member of Ahtela's work group, said pension system reforms should focus on well-being problems in working life rather than increasing the retirement age. "Last year, of the 79,637 people who retired, some 24,000 people took disability pension on the basis of health or mental health problems. The average age of those going to disability pension was 52 years, showing there are major problems in working life," Lyly said. "It would be much more fruitful to solve the problems in the existing labour market first."

The 2005 pension reform increased the average retirement age by abolishing the general retirement age of 65, and making it possible for workers to start receiving a pension between 63 and 68. It also increased the qualifying age for a pension from 60 to 62. As a result, the average retirement age has risen by several months from 59.1 years in 2005, and current legislation allows employees to decide on their retirement policy. "Employees can stay in work until 68, and since 2005 the number of people staying in active employment over the age of 63 has increased. So there is no need to lift the threshold," Lyly said.

The aim of Ahtela's group was to come up with solutions that would increase working careers by one year, and, along with Rantala's proposals, add a further three years on working life. Ahtela said that the negotiations regarding well-being in working life were challenging, but ended in concrete proposals. "Trade union representatives approached the issues from the viewpoint of legislation and norms, while employer representatives based their views on what would be a good practice," Ahtela said.

Trade unions SAK, STTK and Akava are pleased with the results of the negotiations. EK, however, noted the measures are not sufficient to realise the three-year increase.

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