The data used to set the initial values for the projection come from:

• the Finnish Centre for Pensions’ Statistical Database,
• the Finnish Centre for Pensions’ pension register,
• the incomes register shared by the earnings-related pension system,
• the joint statistics of Kela and the Finnish Centre for Pensions,
• the Finnish Centre for Pensions’ PAYG data relating to earnings-related pensions,
• the Finnish Centre for Pensions’ register on the supervision of the insurance obligation of the self-employed, and
• the Financial Supervisory Authority.

Based on this data, the long-term projection (LTP) model progresses in line with given assumptions. The key assumptions concern the following:

1. demographic development,
2. employment rates,
3. retirement risk,
4. growth in earnings,
5. return on pension assets, and
6. inflation.

The population forecast published by Statistics Finland in 2021 is used as the basis. However, the starting level of mortality takes into account the preliminary data on the exceptionally high mortality rates in 2021 and early 2022. In addition, the population forecast has been extended beyond 2070.

The assumptions concerning the employment rate and the development of the earnings level and inflation for the years 2022–2027 follow the economic outlook compiled in May 2022. After these years, the annual growth in real labour costs is 1.2 per cent. It follows that the average annual growth in real earnings in 2023–2090 is 1.16 per cent. As for inflation, the long-term assumption used is 2.0 per cent per year.

As for the projection’s employment rate, the assumed structural unemployment rate at the beginning of the projection period is 7.9 per cent. The employment rate will settle between 73 and 74 per cent in the projection.

Summary of the assumptions of the 2022 long-term projection

	2025	2040	2090
POPULATION
Total fertility	1.45	1.45	1.45
Net migration (thousand)	15.0	15.0	15.0
Life expectancy, 65-year-olds (years)	21.0	23.0	27.2
Old-age dependency ratio (%) *	39.7	44.8	65.4
NATIONAL ECONOMY
Employment rate (%)	74.1	73.4	73.3
Real growth of earnings level (%)	1.18	1.19	1.21
Real return on pension assets (%)	2.5	3.5	3.5
* Ratio of 65-year-olds to 15–64-year-olds

The rising retirement ages are not expected to raise the effective retirement age in full since disability pensions will increase in the older age cohorts.

Based on an observed trend, the cohort-specific disability pension rates will decline over time. The observed development is probably due to a change in work tasks, a higher educational level and the population’s improved health.

The assumption of the real return on pension assets is 2.5 per cent per year until 2031. After that, it will be 3.5 per cent per year. The assumed return has been derived from the expected returns on the various investment instruments and the investment asset allocation. The projected real return is lower for the first 10 years due to, first and foremost, the exceptionally low interest rate level at the beginning.