FINLAND – The Finnish labour market is engaged in a heated debate over how to simplify the country’s complicated retirement system and offer improved benefits to those working for various employers during their working life.
Under the present Finnish system some employees get their pension benefits through several different retirement systems.
“The whole thing started in the autumn of 99, with the idea that four private sector pension laws, TEL, LEL, TaEL and YEL could be fitted together, but nothing has been decided yet” says Markku Hänninen, head of planning at the Finnish Central Pension Security Institute (ETK).
“Quite soon it was realised that it wasn’t useful to try to fit the existing laws together and it was thought that the regulations themselves should be simplified. Public sector pension laws were later added into the discussion and now we’re at the point where some labour market players are willing towards a change and others think it isn’t possible,” he adds.
Experts in the country seem to favour a unified law under which pension benefits should be based on career average salary.
Hänninen believes that, at least, the Confederation of Unions for Academic Professionals in Finland (Akava) and the Finnish Confederation of Salaried Employees (STTK) oppose the change. “I can really see why, because at the moment the core of the discussion is whether pension benefits should be based on career average pay or on an average wage of the last ten years of one’s working life. The first option clearly lowers one’s benefits.” says Hänninen.
Finland has been criticised because the state run system offers lower benefits to those who do not work at the same organisation throughout their working career. “Even if A and B have the same income development, their salaried pension is based on whether they have switched employers or not, and within the concept of social welfare it isn’t really justifiable,” says Hänninen.
The Employees’ Pensions Act (TEL) benefits in Finland can be paid by the employer to an insurance company plan, to a collective pension fund or to a company pension foundation. The Self-Employed Persons’ Pension Act (YEL) benefits can be paid to an insurance company scheme or an industry-wide pension fund. The temporary employee pensions act (LEL) and the Pensions Act for Performing Artists and Certain Groups of Employees (TaEL) benefits have to be paid to the LEL pension fund.