The Finnish government announced the working group set up two years ago to draft a proposal for merging the municipal pension system and the private sector pension system has failed to find a solution acceptable to all parties.

The Ministry of Social Affairs and Health said in a statement: “Implementing the cost neutrality of merging has proved to be the most difficult issue.”

The working group concluded that in order to avoid increasing contribution levels for the private sector as a result of the merger, around €15bn would have to be transferred from the municipal pension system to the private sector pension system, in addition to the pension liabilities.

“This is mainly due to the longer-than-average life expectancy of those working in the municipal sector,” the ministry said.

In its statement on the lack of a solution, the government said the working group’s main areas of focus were risk management and cost neutrality, minimising overall risks and managing total costs.

Various models had been created to determine how the neutralisation fee could be paid, it said, but added that no solution had been found that had been accepted by all parties involved.

However, the government said in the statement that even if the merger did not now take place, the funding of both pension schemes would still be secure.

Finland’s Ministry of Social Affairs and Health and the Ministry of Finance set up a working group in August 2019, consisting of employers’ organisations, trade unions, pension providers and others, to create a proposal to merge the pension systems.

Combining these two sides of the huge second-pillar system would have broken the monopoly on provision of municipal pensions held by the country’s largest pension fund Keva.

In February, Keva’s retiring chief executive officer, Timo Kietäväinen, sounded a pessimistic note in a commentary on the progress of the merger discussions, warning: “Many problems have already been resolved in the preparation, but much remains to be done”.

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