THE YOUNG ADULTS who have entered working life over the past couple of decades may have to deal with a hefty increase in earnings-related pension contributions and small pensions if the population continues to age and birth rate plummet in Finland.
This is the main takeaway from a new projection on the development of statutory pensions in 2019–2085 by the Finnish Centre for Pensions (ETK).
ETK on Tuesday warned that the record-low birth rate and intensifying population ageing will begin to gnaw away at pension financing in the 2050s, potentially raising earnings-related pension contributions in the private sector from under 25 per cent to over 30 per cent towards the end of the projection period.
“The pension system is not in a crisis, but demographic development does cast a dark cloud over it,” phrased Heikki Tikanmäki, a development manager at ETK.
The projection is based on the population forecast of Statistics Finland.
ETK also underscored that although the outlook for pension financing is stable for the next few decades, it would be ill-advised to postpone political decisions on measures to influence the demographic development. The possible measures include raising pension contributions, slashing pension benefits and increasing the investment of pension contributions in securities.
Suvi-Anne Siimes, the chairperson of the Finnish Pension Alliance (Tela), on Tuesday urged policy makers to consider raising earnings-related pension contributions marginally to increase investments.
Postponing the decision, she added, would necessitate considerably bigger increases in pension contributions in the future.
Antti Palola, the chairperson of the Finnish Confederation of Salaried Employees (STTK), similarly drew attention to the need to take timely action to prepare for the mounting pressure to raise pension contributions.
Palola on Tuesday also urged the next government to devise a comprehensive programme to boost employment-based immigration, reminding that any funds spent on integrating immigrants will be offset in the future by a higher employment rate.
Aleksi Teivainen – HT
Source: Uusi Suomi