Financing of the earnings-related pension system is on a stable foundation and benefits are well-secured
The labour market organisations have committed to negotiating the pension system reform such that it takes effect at the start of 2017. The pension reform is expected to extend careers by at least 1.5 years, which will fulfil the tripartite commitments that were previously made. The main strength of Finland’s private-sector earnings-related pension system is its stable financing balance. As part of the Pact for Employment and Growth, the main labour and employer confederations upheld the previously agreed pension contribution increases, which will raise the average pension contribution to 24.4 per cent in 2016.
At the start of 2013, international experts released their findings on the state and development needs of Finland’s statutory earnings-related pension system. The pension scheme received a very positive evaluation. Among the particular strengths of the Finnish pension system are the cover provided by the statutory system, a consensual approach to decision-making, and a commitment to securing stable and long-term sufficiency of funding.
A strong earnings-related pension scheme creates stability for the economy and for society, since the responsibility for pensions extends well into the future. A sustainable pension system must be based on longer careers, general confidence in the pension scheme, fair division of resources between generations, and improving well-being at work. Remaining in working life longer and the funding of pensions will help the Finnish economy endure the change in the age structure.
Major projects are under way to renew the regulation of the pension sector. The preparation of proposals concerning the development of solvency regulations, defining the regulation concerning the governance of earnings-related pension companies, promoting competition in the pension sector, and regulation supporting workability management will continue in 2014.
Varma, for its part, strives to reinforce the pension system and secure pensions through highly successful investment operations, by improving the cost-effectiveness of its operations, and by offering effective earnings-related pension insurance services that support the insured and policyholders in extending careers.
In 2013, the average TyEL contribution was 22.8 (22.8) per cent of the salaries and wages. Employees below the age of 53 contributed 5.15 (5.15) per cent of their pay, while the rate for employees aged 53 and over was 6.50 (6.50) per cent. The YEL contribution was 22.50 (22.50) per cent of the confirmed earnings for those below the age of 53, and 23.85 (23.85) per cent for those aged 53 and over. Earnings-related pension contributions will increase in a frontloaded manner between 2012 and 2016 by a total of 2.0 percentage points to 24.4 per cent. The increase is divided equally between employer and employee.
The return requirement on technical provisions consisted of a 3.0 (3.0) per cent fund rate, a pension liability supplementary factor and the return on equity component. The value of the supplementary factor was 0.94 per cent on average in 2013. The return on equity component in 2013 was 19.92 per cent. The technical interest rate, used to determine the interest rate of the oldest premium loans, insurance contributions and other items, was 4.0 per cent until the end of June, and 4.75 thereafter.