Labour market organisations emerged from weeks of analysis paralysis Thursday to announce an overall increase in the retirement age to 65 for persons born from 1955 onwards. The country’s broadest circulation daily Helsingin Sanomat employs a simple graphic to illustrate how different age groups will be affected by the new agreement:
Birth year****Retirement age
1955 63y + 3 mos
1956 63y + 6 mos
1957 63y + 9 mos
1958 64y
1959 64y + 3 mos
1960 64y + 6 mos
1961 64y + 9 mos
1962 65y
The deal will see workers contribute 1.5 percent of their entire earnings throughout their entire working careers between the ages of 17 and 65, allowing for the accumulation of larger pensions throughout working life. In this way, a retiree’s pension will not be dictated by the size of his or her salary later on in life as is currently the case.
Currently pensions are accumulated from salaries after deduction of a general pension contribution of 5.55 - 7.05 percent. Persons aged 18 – 52 years then contribute 1.5 percent of their remaining salaries to their personal pensions, while the contribution for 53 – 63 year olds is 1.9 percent. Those who hang on and work until the age of 70 will receive a special incentive increase.
According to HS, personal pension contributions should not rise under the new agreement. The paper points out however that pensions will be smaller for persons who have shorter working careers – except in the case of those who are forced to retire early due to disability, as disability pensions will remain part of the system.
HS noted that in 2013 Finns received 27 billion euros in pensions, some 43 percent of all social benefits paid out by the government. The central goal of the pension reform is to lengthen working life and to get more people to finance public spending on services such as education and health care in an effort to lighten the burden on the state.
Once finally accepted and enacted in law, the new pension system is due to be introduced from the beginning of 2017.
Economist: More reforms needed long term
Turun Sanomat canvasses the views of OP-Pohjola chief economist Reijo Heiskanen, who said that Thursday’s retirement age deal addresses the immediate need to bridge the government’s sustainability gap, or the additional financing needed to balance the public sector in the long run.
But Heiskanen said that increasing the retirement age is just one step and that more reforms would be needed.
“We can’t assume that this solution is somehow final or comprehensive. The agreement reached now doesn’t automatically address how longer life expectancy will affect pensions later on (after 2025),” he warned.
The economist concluded that the agreement reached by the labour market organisations probably resemble what the government would itself have proposed.
Frosty relations between SDP's Rinne and National Coalition's Vapaavuori
Iltalehti looks at increasingly frosty relations between headline players in the main government partners, the Social Democrats and the National Coalition, over Thursday’s decision to reject an application for additional time concerning a new nuclear permit application by the power consortium Teollisuuden Voima or TVO. TVO hoped to build a fourth reactor at the Olkiluoto nuclear facility in southwest Finland and had the support of SDP Finance Minister Antti Rinne.
The National Coalition’s Economic Affairs Minister Jan Vapaavuori however, was openly sceptical of TVO’s ability to bring in a fourth reactor, given the cost and time overruns involved in the construction of the number three reactor.
According to the tabloid daily, the duo of ministers have clashed publicly and privately over the matter, with the beaten Rinne reportedly reacting to Thursday’s decision in a decidedly surly fashion.
“A stupid decision was made,” the paper reported Rinne saying openly.
“It seems incredible and it shows that this assessment is wrong. This was not a rational decision,” Rinne added, responding to Vapaavuori’s comment that TVO did not appear to be committed to a fourth reactor project.
Vapaavuori was more philosophical about the difference of opinion saying that both men were capable of dealing with work issues. However he had a more caustic view otherwise.
“I don’t need to be pals with him outside of work-related matters,” Vapaavuori reportedly remarked.
Professor: Tough times ahead for Stubb government
Ilta Sanomat also highlights the openly festering intra-cabinet relations. The tabloid turns to constitutional law professor Veli-Pekka Viljanen of Turku University to pick apart the drama that played out Thursday.
“Normally government’s internal conflicts, especially on key issues, are resolved before plenary sessions. That’s been the tradition and a long-held practice,” Viljanen said.
He pointed out that there seemed to be deficiencies in Rinne’s proposal to grant additional time to TVO for a new nuclear permit application, a significant decision on the part of the government.
“These are by no means minor matters and somewhat worrying from the perspective of the government’s capabilities,” Viljanen added.
The Turku professor said that based on yesterday’s theatre he expected Alexander Stubb’s government to face tough times well before next spring’s parliamentary elections.
