International evaluators find the Finnish pension system sustainable
The Finnish Centre for Pensions recently commissioned internationally recognised pension experts, Professors Nicholas Barr and Keith Ambachtsheer, to evaluate the Finnish pension system. The experts found the Finnish pension system comprehensive and sustainable.
In addition to strengths, both evaluators also found weaknesses in the Finnish system. Professor Barr recommends that Finland raise the minimum retirement age to reflect longer life spans by setting a lowest possible retirement age for each age group. Barr does not believe that current incentives are enough to make people retire later. Barr nevertheless maintains that changes can now be made at a leisurely pace, because the Finnish pension system is not in a crisis.
According to Professor Ambachtsheer, the funding for pensions should be re-evaluated. Approximately 75 per cent of revenue from pension contributions is currently used to pay pensions while 25 per cent is placed in a fund for future pensions. Ambachtsheer would raise the percentage of revenue placed in the fund. From the perspective of diversification, on the other hand, the percentage of international investments should be increased. In his evaluation Ambachtsheer also draws attention to the administrative costs of the Finnish pension providers in charge of earnings-related pensions. Those could in his opinion be reduced by forming larger pension insurance companies and by stronger cooperation between the companies.
The evaluation report in its entirety and the related material is available at the website of the Finnish Centre for Pensions.