Finland should not impose a limit on the amount of first-pillar pension an individual can have because more money entering the system benefits all members by stopping the rise in collective costs, according to pensions alliance TELA.
Nikolas Elomaa, legislative director at TELA, told IPE: “TELA does not want to have a ceiling on pensions – we think taxation is already taking care of the ceiling.”
He was responding to the ongoing political debate within Finland about the possible imposition of a limit on the monthly amount of pension from the first-pillar earnings-related system an individual may receive.
With the Finnish parliamentary election coming up on 19 April, it is seen as possible that some of the left-of-centre political parties could include a pension ceiling in their plans.
The idea has gained popularity as an ethical issue, with some seeing it as wrong that very wealthy individuals can save for pensions that are much higher than those received by people on low incomes.
Elomaa said people with very high pensions in Finland already have to pay 7% more in taxes.
He said a pension ceiling would in any case fail to prevent the very wealthy from accruing large pensions.
“These wealthier people would still get their pensions elsewhere,” he said, citing private insurance.
In neighbouring Sweden, he said the pension ceiling in force had resulted in very high earners buying independent insurance from private providers.
However, in Finland, 95% of all pensions are accrued in the first-pillar earnings-related pension system, he said.
The fees paid by very high earners on money invested in pension funds in Finland are good for the system, Elomaa argued.
“They are also good for people on low pensions because, if we look into the future, there is going to be a problems with an ageing Finnish population,” he said.
“The more money [pension funds] get, the more they can stop rising costs.”
Elomaa said TELA was wary of a proposal that could create two classes of pension saver – those in the regular system and those with private providers – saying it was more useful to have a system of solidarity.