2025 Pension reform
According to the calculations of the Finnish Centre for Pensions, the reform strengthens pension financing. Estimated at the contribution level, the overall reform would reduce the pension contributions under the Employees Pensions Act (TyEL) by, on average, 1.5 percentage points. The equity weight will rise which will increase the pension assets.
Pensions will be determined as before, and there will be no change to age limits up to 2030.
The Ministry of Social Affairs and Health will start the legislative drafting process in February 2025. The timetable for the entry into force of the changes will be specified as the legislative process progresses.
Key actions
The reform
- aims to increase the investment returns on pension assets by changing the investment regulations that apply to private sector earnings-related pension providers;
- includes an agreement on a contribution rate of 24.4% for private sector earnings-related pensions (TyEL) for the period from 2026 to 2030;
- includes an inflation stabiliser that curbs index adjustments to earnings-related pensions if the earnings-related pension index increases faster than the wage coefficient over a two-year period;
- does not change current pension benefits, such as the retirement age and pension accrual rates.
Investment reform
- is part of the pension reform and improves the opportunities for private pension providers to pursue better returns on pension assets;
- raises the equity-linked buffer fund to 30% which, in turn, allows for an increase of the equity weight of investments to a maximum of 85%;
- lowers the solvency limit to 95%, which reduces forced sales of investments at unfavourable times;
- expands access to leverage in real estate investments and limits premium lending;
- increases the investment risks and return fluctuation of pension assets for better or worse;
- does not change the basic principle stated in law that pension assets must be invested profitably and securely.
Inflation stabiliser
- is a new mechanism affecting the index adjustments of earnings-related pensions are determined;
- curbs the annual index increases of earnings-related pensions if consumer prices rise faster than wages over a two-year period;
- is technically linked to the development of the earnings-related pension index and the wage coefficient;
- will enter into force 2030 at the earliest;
- can be considered an automatic stabiliser. The first automatic stabiliser was introduced in the Finnish pension system in connection with the 2005 pension reform. At that time, the pension-adjusting life expectancy coefficient was agreed on. In connection with the 2017 pension reform, the retirement age for the old-age pension was linked to life expectancy.
Pension reform preparations 2023–2025
The reform and the suggested measures were prepared in two working groups with representatives from the social partners, the Ministry of Social Affairs and Health and the Ministry of Finance. The proposal for the pension reform was presented to the Finnish Government by 31 January 2025. After that, the proposal will be compiled into a government bill.
Falling birth rates, a deteriorating dependency ratio and weak economic growth challenge the financial sustainability of the pension system in Finland.
The aim set by the Finnish Government, with the end of January 2025 as the deadline, is to outline the necessary concrete amendments to the earnings-related pension scheme that are required to ensure the system’s financial sustainability and adequate benefit levels. The amendments must strenghten public finances in the long run by approximately 0.4 percentage points relative to GDP, that is, by about one billion euros.
In addition, concrete means to stabilise the level of pension insurance contributions in the long term must be found, that is, means that allow the pension system to adjust to possible shocks via a rule-based fiscal stabilisation system.
The Government Programme also includes entries that directly concern the pension system, such as disability pensions.
More on other sites:
20 June 2023
Government Programme was published
18 October 2023
The social partners and the ministries formed working groups
31 January 2025
The Government is presented with a proposal of the reform; deadline for the work of the working groups
Pension negotiation group preparing the proposal of the social partners
On 18 October 2023, the social partners established the pension negotiation group to prepare its proposal for reform measures. The group is summonned by Director Ilkka Oksala (Confederation of Finnish Industries).
The group hears experts from, among others, the Ministry of Social Affairs and Health, the Ministry of Finance, the Finnish Centre for Pensions and the earnings-related pension field.
Members:
- Ilkka Oksala, Confederation of Finnish Industries, convener
- Minna Ahtiainen, Finnish Confederation of Professionals
- Mika Juutinen, Local Government and County Employers
- Ilkka Kaukoranta, Central Organisation of Finnish Trade Unions
- Eugen Koev, Akava – Confederation of Unions for Professional and Managerial Staff in Finland
- Samppa Koskela, Finnish Confederation of Professionals
- Juha Knuuti, Local Government and County Employers
- Sinikka Näätsaari, Central Organisation of Finnish Trade Unions
- Katri Ojala, Akava – Confederation of Unions for Professional and Managerial Staff in Finland
- Vesa Rantahalvari, Confederation of Finnish Industries
- Antti Tanskanen, Confederation of Finnish Industries
The pension negotiation group’s work is monitored and guided by a group consisting of the organisations’ managing directors and chairs.
Ministries’ working group
The Ministry of Social Affairs and Health and the Ministry of Finance established on 18 October 2023 a working group to prepare the reform of the pension system. Director General Liisa Siika-aho (Ministry of Social Affairs and Health) acts as the Chair of the working group. The term of the working group ends on 31 January 2025.
Director Allan Paldanius represents the Finnish Centre for Pensions in the group.
Members:
- Liisa Siika-aho, Ministry of Social Affairs and Health, Chair
- Juha Knuuti, Local Government and County Employers
- Olli Kärkkäinen, Ministry of Finance
- Sinikka Näätsaari, Central Organisation of Finnish Trade Unions
- Katri Ojala, Akava – Confederation of Unions for Professional and Managerial Staff in Finland
- Vesa Rantahalvari, Confederation of Finnish Industries
- Jaana Rissanen, Ministry of Social Affairs and Health
- Samppa Koskela, Finnish Confederation of Professionals
- Antti Tanskanen, Confederation of Finnish Industries
The working group reports on the progress of its work to the Ministerial Finance Committee.
The Finnish Centre for Pensions offers objective expertise and research data on themes relating to the pension reform.
In our communications, we make use of previously produced research, statistics and reports.
Director Allan Paldanius represents the Finnish Centre for Pensions in the pension reform group established by the Ministry of Social Affairs and Health and the Ministry of Finance. We carry out tailored statistical data collection and surveys requested by the working groups.
Overall review of the Finnish pension system
Publications on pension financing
Our Managing Director Mikko Kautto answers questions relating to pension reforms and the related preparatory work.
Head of Department Ismo Risku answers questions relating to statistical data, scenarios, financial statements and other reports of the Finnish Centre for Pensions.
Head of Department Susan Kuivalainen answers questions relating to research data of the Finnish Centre for Pensions.
