The Organisation for Economic Cooperation and Development(OECD) has queried Finland’s planned pension reform, saying it is “overly generous” in parts and that there is “uncertainty” over some of the assumed employment rates needed for the reforms to be effective.
Finland said last month that it plans to overhaul its earnings-related pension system from 2005. The key points are that a pension can accrue from employment between 18-68. The annual accrual rate increases in stages with age and the accrued pension may exceed 60%.
There is to be a flexible old-age pension between 62 and 68 while the abolishing of the unemployment pension for those born after 1950 will be compensated through entitlement to unemployment allowance.
Another feature is a “life expectancy coefficient” which adjusts earnings-related pensions due to longer life expectancy.
The OECD says in an Finland that the reform includes some “striking features that should enhance the sustainability of the system”.
But it sees problems ahead. “While the reform is an important step towards enhancing the sustainability of the system over coming decades, more could have been achieved in this respect, particularly because some aspects of the reform appear overly generous.”
It says the reform package includes a rise in accrual rates for the over 52s. It says this “serves no clear purpose insofar as these people would probably be mostly employed anyway”.
The OECD says there is “considerable uncertainty” surrounding the estimated rise in employment rates that are key for the reforms to work.
“Of particular concern is that the abolition of early retirement schemes could lead to increased use of disability pensions, which could seriously undermine the reform.
“There is also uncertainty about the future rate of return on the pre-funded part of the pension system.”
For its part, the Finnish Centre for Pensions, formerly the Central Pension Security Institute, says: “Most people will benefit from the reform. Among the winners, there are young people, old people, students and parents of small children. Their pensions will increase.”
It says the reform is designed to obtain cost savings.

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