Disability pensions and work ability

The number of people retiring on disability pension has clearly decreased during the 2000s. Nevertheless, working life still ends prematurely for many due to disability. Work ability is increasingly supported in various ways to make it easier to continue working despite health problems.

Research on disability pensions and how to support work ability produces important information for the development of pension and rehabilitation systems.

More than 50% of disability pension recipients retire due to mental disorders. 37% of disability pension applications are rejected. Retirement on a disability pension is more common among blue-collar than white-collar workers. Disability pensioners have a lower income than old-age pensioners. Less than one in three returns to work after receiving a fixed-term rehabilitation pension. Nearly 80% of partial disability pensioners work.

Disability retirement

Around 20,000 persons retire on a disability pension each year. Of them, around 5,000 retire on a partial disability pension. It is important to study disability retirement by population groups to be able to identify factors affecting disability retirement.

The incidence of disability retirement in Finland has sharply declined over the past 15 years. The decline has been larger for pensions granted due to somatic diseases than for those granted due to mental and behavioural disorders.

In recent years, the development has fluctuated. In 2018 and 2019, the incidence of disability retirement in Finland increased, mainly because of the growth in the incidence of disability retirement due to mental disorders. In 2020 and 2021, on the other hand, the incidence of disability retirement strongly decreased. This was probably because of the corona pandemic. Since then, the incidence of disability retirement has increased slightly again.

Disability retirement has declined particularly among the over-55-year-olds. Among those aged 60 or over, the incidence of disability retirement has increased, mainly because drawing a partial disability pension has become increasingly common. However, younger age groups are seeing a decline in the transition to partial disability pensions. The rising retirement age for the old-age pension is expected to increase the transition to disability pensions among the oldest working-age individuals.

The share of women receiving a disability pension has increased. At the beginning of the century, the incidence of disability retirement was higher among men than women, but currently, a clear majority of new disability pensioners are women.

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In the early 2000s, disability retirement due to mental disorders and somatic diseases decreased clearly. In recent years, however, the incidence of disability retirement due to mental disorders has increased. It follows that mental disorders play an increasingly greater role in disability retirement.

Currently, around one third of all disability pensions are granted due to mental disorders. This type of disability retirement typically starts at a younger-than-average age. Already more than half of all disability pension recipients receive the pension due to mental disorders.

The spectrum of mental disorders is varied. Disability retirement based on depression and anxiety disorders has increased while disability retirement due to psychotic disorders has decreased. Throughout the 2000s, disability retirement based on mental disorders has decreased in older age groups but increased steadily in younger age groups. It is not clear whether mental disorders among young people have increased or whether, for whatever reason, they lead to disability retirement more frequently than before.

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Overall, disability retirement is clearly more frequent among the older age groups. It increases particularly among those who are 50 or older. Nevertheless, disability retirement among the young has gained much attention and caused great concern since, unlike in the older age groups, disability retirement of the young has increased steadily throughout the 2000s.

Mental disorders are clearly the most common disease group among young disability pensioners. The share of disability retirement due to depression increases while that due to psychotic disorders decreases the older the age group.

Underlying the growth in the disability retirement incidence among the young is an increase in the incidence of pensions granted due to mood disorders (depression and anxiety).

Most disability pensions of the young are granted as fixed-term disability pensions. Fixed-term pensions are less often converted to permanent pensions in the younger age groups compared to the older age groups. However, young people tend to be on fixed-term pensions for a longer time than older people.

Incidence of disability retirement based on mental disorders for under-35-year-old men / 10,000 person-years 

Diagnosis 2007 2011 2015 2019
Depression 3.2 3.6 4.5 5.9
Mania and bipolar disorder 1.3 1.4 1 0.9
Anxiety 1.3 1.2 1.7 2.3
Psychotic disorders 7.1 6.6 6.6 6.8
Other mental disorders 2.7 4 4.6 4.7
Total 15.6 16.7 18.4 20.7

Incidence of disability retirement based on mental disorders for under-35-year-old women / 10,000 person-years 

Diagnosis 2007 2011 2015 2019
Depression 5.7 5.9 7.7 10.6
Mania and bipolar disorder 2 2 1.9 2.5
Anxiety 1.3 1.8 2.4 3.1
Psychotic disorders 4.3 4 4 3.7
Other mental disorders 2 2.3 3.2 3.3
Total 15.4 16.1 19.3 23.1

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The incidence of disability retirement is not even in all socioeconomic classes. Manual workers run a clearly higher risk of disability retirement than upper non-manual employees. A low educational level and a low income are also associated with a higher risk of disability retirement. The higher risk of disability retirement of the lower socioeconomic classes is largely explained by physically more strenuous working conditions. The health of manual workers also tends to be poorer than that of upper non-manual employees.

However, in the 2000s, socioeconomic differences in disability retirement have narrowed as retirement has decreased more in the lower than in the upper social classes. Socioeconomic differences in disability retirement are larger in disability retirements caused by somatic illnesses than those caused by mental disorders.

There are also occupational differences in disability retirement. Disability retirement is common in many blue-collar occupations, such as gardeners, replacement workers, cleaners, construction finishing workers and school assistants, as well as in many ancillary occupations in health care, such as practical nurses.

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In 2023, 37 per cent of all disability pension applications were rejected. Most often applications are rejected because the applicant is not considered disabled enough or because the disability has not continued long enough. Granting a disability pension requires an uninterrupted period of disability that spans at least one year.

The share of rejected disability pension applications has increased in the 2000s. Changes in the background factors of disability retirement applicants do not explain this growth. However, the number of disability pension applications due to mental disorders has increased, and the share of rejected disability pension applications based on mental disorders is higher than average.

A large share of those whose disability pension applications have been rejected end up on a disability pension over the following years. Receiving an unemployment or sickness allowance is also common after a rejected disability pension application. Many rejected applicants have varied sources of income in the years following the rejection. This indicates that they typically suffer from some type of problem relating to work ability even if their disability pension application was rejected.

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A person may be granted a disability pension if their ability to work has been reduced without interruptions for at least one year. As a rule, loss of income for shorter periods of disability is compensated with a sickness allowance. The longer the sickness allowance has continued, the higher the risk of disability retirement.

During the period of the daily sickness allowance, efforts are made to determine the need for rehabilitation and support a return to work. 70 per cent of those who have received a sickness allowance for the maximum limit of one year retire directly on a disability pension. Of the remaining 30 per cent, more than half apply for a disability pension but are not granted one at this stage. Slightly less than half do not apply for a disability pension. They often return to paid employment. Those whose application for a disability pension is rejected often receive an unemployment benefit.

Unemployment and disability are often intertwined in many ways. It is common to receive unemployment benefits before retiring on a disability pension. Although rehabilitation is the primary alternative relative to disability retirement, vocational rehabilitation before disability retirement is rather rare and occurs mainly in the last few years before disability retirement.

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Disability retirement is more common in the public than the private sector. In particular, the incidence of partial disability retirement is higher in the public than the private sector, while the difference in the incidence of full disability retirement between the sectors is small.

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The differences in age and gender structure of public and private sector employees partly explain why the incidence is higher in the public sector. Public sector employees are older than private sector employees, and most public sector employees are women.

Sector differences in occupational structures, on the other hand, do not explain the differences in incidence. There are also differences in pension financing and the definition of disability, which may partly explain the higher incidence of disability retirement in the public sector.

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Supporting work ability and continuing at work

Supporting continued working through vocational rehabilitation has increased in recent decades. During a period of a daily sickness allowance or a fixed-term disability pension (also called a cash rehabilitation allowance), efforts are made to facilitate a return to work through treatment or rehabilitation, even when the disability is prolonged.

A person with a reduced work ability is entitled to vocational rehabilitation financed by an earnings-related pension provider if it is established that the person is likely to retire on a disability pension soon.

As a rule, vocational rehabilitation takes place at the employee’s workplace, which often means work try-outs or new tasks at one’s own place of work. If rehabilitation at the workplace is not considered appropriate, the earnings-related pension provider can also finance training for another occupation.

Vocational rehabilitation arranged by earnings-related pension providers is clearly more frequent among women than men. The gender gap is particularly wide in rehabilitation received due to mental disorders. Receiving vocational rehabilitation is more common in larger companies. This may be explained by the fact that larger employers can more easily offer part-time work or other work arrangements than smaller employers.

Studies have not provided clear evidence of vocational rehabilitation significantly improving work ability or preventing retirement on a disability pension, at least not in the long term. As rehabilitation practices have been in transition in recent years, there is no research data available on the current situation regarding the impact of vocational rehabilitation.

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How well rehabilitation processes work has been studied mainly through interviews with both rehabilitation professionals and rehabilitees. Key factors for successful rehabilitation include adequate support and monitoring throughout the entire process. Moreover, both professionals and rehabilitees consider the following as essential for the success of rehabilitation:

  • careful planning and correct timing of rehabilitation,
  • rehabilitee’s motivation,
  • effective cooperation between the stakeholders involved in the rehabilitation,
  • the rehabilitee’s possibilities to impact the rehabilitation process, and
  • taking the rehabilitee’s individual needs into account.

According to studies, more attention should be paid to the period following work trials financed by pension providers and the subsequent employment status. A short work trial alone may not be sufficient to ensure a return to work.

Understanding the processes involved in returning to work and evaluating the outcomes of rehabilitation requires monitoring rehabilitees over a sufficiently long period.

According to studies, it is not meaningful to evaluate rehabilitation processes solely from the perspective of a single system, such as only from the perspective of rehabilitation under the earnings-related pension system. Many rehabilitees require services from various actors, either in turns or at the same time. There are challenges in the cooperation and division of responsibilities among different actors, and information does not always flow smoothly, for example, between the earnings-related pension system and employment services.

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In Finland, a disability pension may be awarded either as a fixed-term disability pension or as a permanent disability pension. The disability pension is granted as a fixed-term rehabilitation benefit if it is possible that the employee’s work ability can be restored after the onset of the benefit. The share of fixed-term disability pensions of all new disability pensions has increased. Currently, clearly more than half of all new disability pensions begin as a fixed-term disability  benefit.

A large share of fixed-term disability pensions is later converted into permanent pensions. Forty one per cent of all fixed-term disability pensions that started in 2015 were converted into permanent disability pensions within four years. 30 per cent returned to work during the same period.

In recent years, an increasing share of persons receiving a fixed-term disability pension has returned to work while a decreasing share has transferred to a permanent disability pension. In addition, an increasingly higher share of fixed-term disability pensions continues for more than four years.

There are differences between disease categories in the return to work from a fixed-term disability pension. The return to work of those suffering from mental disorders, in particular, has been weak. Although retirement on a permanent disability pension occurs less often than before, return to work has not increased.

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The share of partial disability pensions of all new disability pensions has increased in recent years. Currently nearly every third earnings-related disability pension is granted as a partial pension. Most (around 80%) partial disability pension recipients continue working while drawing the pension. The average duration of a partial disability pension is just under three years, and most recipients work throughout the time they receive the pension.

Partial disability pension recipients differ from full disability pension recipients in many respects. Nearly 70 per cent of partial disability pension recipients are women, and many receive the pension due to musculoskeletal diseases.

Nearly half of all partial disability pension recipients are public sector employees, one-third are private sector employees, and about 5 per cent are self-employed. Less than one-fifth were unemployed before starting their partial disability pension. Most recipients have at least an intermediate educational level and one-third have completed higher education.

There are also income differences among disability pension recipients. Those who continue working while receiving a disability pension have higher net incomes than others. Additionally, disability pension recipients who come from white-collar jobs or have worked as self-employed persons tend to have higher average income levels compared to others.

A transition from partial disability retirement to full disability retirement is relatively rare. During a four-year follow-up period, one third of the 20–58-year-olds who retired on a partial disability pension transitioned to a full disability pension while half continued drawing a partial disability pension. The rest either returned to work or became unemployed.

Probability of transition from partial DP to full DP and to other states during follow-up, %

Diagnosis Continued on partial DP Moved to full DP Moved to employment Moved to unemploy­ment Moved to old-age pension Other
All 52 33 9 3 1 1
Musculo­skeletal diseases 56 32 7 3 1 1
Mental disorders 41 37 16 5 1 0
Other diseases 53 33 8 3 1 3
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Retirement on a disability pension does not necessarily mean stopping work altogether. While drawing a pension, disability pension recipients may earn up to 40 per cent and partial disability pension recipients up to 60 per cent of their established average pre-disability earnings.

When a disability benefit is granted in the form of a partial disability pension, the individual is considered to have some work ability left and to be able to continue working while drawing a partial disability pension. However, the individual is not required to work. Nearly 80 per cent of individuals on a partial disability pension work while drawing the pension.

The work ability of individuals on a full disability pension, on the other hand, is much weaker than that of individuals on a partial disability pension. Hence, working while drawing a full disability pension is less common. Of the recipients of a full disability pension, an ample 10 per cent work while drawing the pension.

Those with a higher education and those recently retired work more often while receiving a pension than those with a primary education and those who have received a full disability pension for a longer time.

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In 2023, the average total pension of all disability pensioners was approximately 1,276 euros per month. This is clearly less than what old-age pensioners received. Disability pensioners often have a meagre income.

Disability pensions have decreased slightly on average in the 2000s. This is because disability pensioners are younger than before and have retired on a disability pension at a younger age than before.

The share of disability pensioners receiving an earnings-related pension has decreased while the share of those receiving only a national pension has increased. The guarantee pension that was introduced in 2011 has improved the situation for many disability pensioners since the proportion of disability pensioners who receive this pension benefit is large.

The income of disability pensioners remains lower than average also in old-age retirement since the disability pension is converted into an old-age pension of the same amount when the individual reaches their old-age retirement age. Old-age pensioners with previous disability pension experience more economic difficulties in covering, for example, housing and health care costs than old-age pensioners without a previous disability pension.

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Ongoing Research Projects

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Finnish Centre for Pensions – Central body of and expert on statutory earnings-related pensions