Finland is a country with a high social level of citizens. In 2014, the Finnish authorities announced a pension reform, which resulted in an increase in the retirement age from 59 to 65 years. The government took this step because life expectancy in the country has increased and the birth rate has decreased. If the situation does not stabilize by 2030, then the pension framework may be shifted again.
Despite the changes that have occurred, stability prevails in Finnish society, thanks to a professionally organized pension system.
Pension system in Finland
In short, the Finnish pension system is a combination of private and state forms of social protection for people. The Finnish Pension Fund has two sources of savings:
- The people’s savings portion is guaranteed to those people who have not accumulated enough income or have no income at all. The national pension is guaranteed to everyone, its amount changes according to inflation. Pensioners who are entitled to only the national pension are supported by additional social benefits.
- The income pension is accumulated from deductions from the wages of the working-age population. If the income portion has accumulated to the amount of 866 €, then the pensioner will not be paid a national pension. The income pension for men in Finland is larger than the corresponding pension for women.
The size of the income pension is 50–60% of average earnings without deductions. The average income pension in Finland for men is 1610 €, for women 1258 €. Due to the fact that pension contributions accumulated in the country’s public and private pension funds are involved in investment projects, a stable increase in pensions is possible.
The pension system in Finland protects single people, disabled people, and families left without a breadwinner. These categories of citizens receive a civil and income minimum pension, slightly larger than the majority of people. For example, the pension of single pensioners is 50 € higher than that of family pensioners.
When assigning an old-age pension, the following factors are taken into account:
- accumulated amount of deductions;
- social status;
- age;
- family status;
- disability (if any).
It is believed that to accumulate a decent pension, a Finn must work for about 38 years. If a person works in hazardous production, performs heavy non-mechanized labor, or performs mentally difficult work, he can retire after accumulating 18 years of preferential service.
Housewives also receive a pension upon reaching 65 years of age, they are entitled to 700 €.
A private entrepreneur accumulates his retirement pension by paying contributions to a private fund for entrepreneurs. As for the employee, deductions from his salary go to the Pension Fund, and the employer also makes a certain share for him. A special pension fund, Mela, has been created for workers in the agricultural sector.
Features of pension provision in Finland
The Finnish pension system also supports immigrants. EU citizens who have lived in Suomi for more than 3 years since reaching the age of 16 can receive a pension here. Visitors from other countries, including Russia, must live on Finnish soil for more than five years after turning sixteen.
Finnish citizens who have spent their entire lives abroad can also count on pension payments, but not in full.
Finnish law establishes retirement at age 65, but you can go on a well-deserved retirement at age 63. For those who decided to retire 2 years earlier, the payment amount will be 75 percent of the total amount.
Some retirees refuse to leave work at 65. By law, Finns can work up to 68 years of age and the employer does not have the right to fire an elderly employee in order to make room for younger candidates. A person who works until the age of 68 receives a pension increase of 4.5% for each additional year. A working pensioner does not receive a pension until he retires.
Structure of the Finnish pension system
The Finnish pension system is unique even by European standards. It is a combination of private and public funds. The coordinator of the work of insurance and pension funds is the Center for Pension Protection, which also informs the population. The collection of contributions and the calculation of pensions are regulated at the legislative level.
Each working citizen transfers a certain share to the Pension Fund. Moreover, every year the pension amount is reviewed and adjusted to take into account inflation. As a result, having become a pensioner, a person receives a pension in accordance with the current price level.
The KELA Pension Administration does not pay retirement pensions. This is the prerogative of special pension funds. KELA distributes national and guarantee pensions. Additional benefits for pensioners, which are also administered by KELA, are housing allowance and care allowance.
If a person has not earned a labor pension or its amount is small, then KELA will grant him a national pension. A guaranteed pension is assigned if the amount of all other payments does not reach the minimum level.
Unemployment pension and disability pension are paid until the person reaches 65 years of age. Afterwards, the pensioner is entitled to an old-age pension.
Depending on the region of residence, the pension amount may differ by 20 €. The highest pensions are among residents of Helsinki and the area close to the capital, as well as among the population of the Åland Islands.
Pensioners receive monthly payments into their bank account. An application for a pension can be submitted at a department office, over the Internet, or even by telephone. KELA offers a video communication service with clients and has Russian-speaking employees.
An achievement of the Finnish pension system is the fact that here a pension is guaranteed to everyone, including the unemployed, housewives, and immigrants. You can receive a small allowance even after working in Finnish territory for only a short time. Upon reaching 65 years of age, all categories of citizens are guaranteed payments.