Finnish pensions may recover quickly
FINLAND - Finnish pension insurance companies may see investment incomes in 2009 recover the significant losses from last year quicker than expected, although there is still a need for people to work longer, Ilmarinen has claimed.
At a seminar on the current financial environment last week, Jaakko Tuomikoski, deputy chief executive of Ilmarinen Mutual Pension Insurance Company, said if the losses from 2008 had "remained permanent" there would have been increased pressure to raise pension contributions.
That said, he said the "surprisingly brisk pace" of recovery in stock markets since March means the losses from 2008 "may yet be compensated more quickly than anybody had expected".
Tuomikoski pointed out, however, that employment pensions are financed through pension contributions as well as returns on investments, so "the success of investments and the length of employment careers are key in considering the strength of the pension system".
He suggested the financial crisis may have changed financial structure permanently and argued it "remains to be seen" if future investment incomes are lower in the future compared to previous experience.
Instead, Finland is investigating ways to extend people's employment careers - including an agreement to increase retirement age by three years from 2025 - with the appointment of two working groups of labour market organisations and other interest groups. One team is examining the structure of the pension system, while the other is looking at developing working lives. (See earlier IPE articles: Workplace healthcare 'key' to delaying retirement and Union anger over Finnish retirement increase)
"In order to postpone retirement, what is needed is jobs as well as the ability and willingness to work. The hardships resulting from the financial crisis are about to tip the rate of employment levels among the ageing workforce downward," said Tuomikoski.
But he added: "Finland's demographic age structure has not changed at all. Thus, once the recession has passed there is a good chance that the employment rates of the ageing population will return to the upward trend in the long run."
He told the seminar there is reason to have a confident outlook on the Finnish employment pension system, as the risks are spread as widely as possible.
"Due to its well-planned structure, our pension system will weather the financial crisis and the recession with a lot less damage than will be suffered by the pension systems of most other countries," said Tuomikoski.
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