Finnish pensions are helping recovery - Katainen
FINLAND - The Finnish finance minister, Jyrki Katainen, has local praised pension funds for their investment in corporate loans as doing so is expected to contribute to the country's economic recovery.
Speaking to IPE, Katainen noted the current environment has prompted several Finnish pension insurance firms to increase their investments in corporate loans recently. According to the Finnish Pensions Alliance TELA, the share of corporate loans among Finland's eight mutual pension insurance companies increased from 4.3% to 9.5% over the second half of 2008.
"Pension companies are now taking part in warding off the crisis by increasing the amount of pension contributions they lend to companies as financing. This has been a very good and significant help to the crisis, giving several billions in financing for companies," he said.
That said, as well as focusing on the pension funds' contribution to corporate lending, Katainen noted further work was needed to improve Finland's pension regime and encourage people to stay in employment for longer, or the country's finance could suffer.
"The working group, which government and labour unions agreed to set in March to find ways to increase retirement age to 65 years, will have to complete its task by the end of the year," said Katainen.
"It is under major pressure to succeed and to come up with ways to develop the system so that people would stay in working life three years longer than today,".
The work group was set as a response to the uproar expressed in February to government plans to increase the retirement age from 63 to 65, effective from 2011.
According to the announcement made at the time by prime minister, Matti Vanhanen, there was no need to negotiate the issue with the unions as they would have rejected it out of hand.
At present the average effective retirement age in Finland is 59.4 years.
The work group consists of representatives of labour unions and ministries of finance, health and social affairs and is led by Jukka Rantala, managing director of Finnish Centre for Pensions.
Katainen argued the earlier pension reforms introduced in 2005 had not been sufficient.
"The reforms in 2005 were a very positive and a major reform, from an international viewpoint also, but they were not enough to extend years in active employment," he said.
"Every person must understand that if we only work until the age of 59, our welfare society costs more than we contribute. But one more year at work would adds some €3bn to the state finance," he added.
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