The pensions reform currently in progress in Finland is expected to strengthen the Nordic country’s public finances by twice the amount politicians originally targeted, according to its draft legislation now out for consultation.
In the bill distributed earlier this month for comment, Finland’s Ministry of Social Affairs and Health states: “The proposed changes are estimated to reduce the fiscal sustainability gap by approximately 0.8 percentage points in relation to GDP.”
Pensions industry association TELA commented that in the mandate prime minister Petteri Orpo gave the labour market organisations to devise the reform in 2023, the savings target had been set at 0.4 percentage points in relation to GDP, corresponding to approximately €1bn.
“The reform ultimately achieved twice as much as its goal,” said TELA director Jari Sokka.
According to the ministry, the aim of the proposed changes is to improve the financial sustainability of the earnings-related pension system and strengthen public finances by increasing the investment returns of pension institutions.
The bill proposes amendments to provisions of the Employee Pensions Act and the Act on the Calculation of the Solvency Limit of a Pension Institution and Diversification of Investments, to allow increased equity risk, with solvency provisions being relaxed to allow more risk in all investment categories.
Out for consultation until 4 February 2026, the bill also proposes broadening pension providers’ possibilities to take on debt for real estate investments.
More funding is to be allocated annually for old-age pensions in order to finance future pensions, with the ministry saying strengthening funding is fair, especially for younger generations, and helps prepare for risks.
Regarding the annual uprating of pensions in payment, the bill proposes introducing an “index limiter” from 2030 onwards, ensuring earnings-related pensions do not increase significantly more than salaries.
TELA – which criticised the idea of a pensions stabiliser early on in the reform process — said it strongly supported approval of the bill, which is due to be sent to parliament at the end of March.
”We believe that the Ministry of Social Affairs and Health has guided the preparation process skillfully, and the pension agreement negotiated jointly by the social partners is implemented well in the proposal,” said Sokka.
Read the digital edition of IPE’s latest magazine
No comments yet