Two tripartite working groups draft retirement reforms

Last spring, the Finnish government appointed two tripartite working groups to make proposals for pension system reforms. A key target has been to strike a deal between trade unions and employers on ways to lengthen employees’ career and working life. The working group tasked with proposing overall improvements in working life reached an agreement. However, the other working group, involved in raising the retirement age, failed to generate clear results.

The lengthening of people’s careers has been one of the most notable issues on the social partners’ agenda in recent years. To this end, two tripartite working groups were appointed by the Finnish government in the spring of 2009 to help strike a deal between trade unions and employers on ways to encourage employees to retire later in their working life. In January 2010, the country’s Prime Minister, Matti Vanhanen, and the Minister of Finance, Jyrki Katainen, requested all sides involved in the negotiations to reach agreement on pension reforms and extending the working life.

First working group makes some progress

The leader of the so-called Ahtela working group, Jukka Ahtela – who is a director of the Confederation of Finnish Industry (Elinkeinoelämän keskusliitto, EK) – stated that he is pleased with the results achieved by his working group. The group has been negotiating on the matter since April 2009 and has been able to work largely outside the glare of media attention. The outcome of its negotiations has been presented to Prime Minister Vanhanen.

The three trade union confederations – the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK), the Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK) and the Confederation of Unions for Academic Professionals (Akateemisten Toimihenkilöiden Keskusjärjestö, AKAVA) – have stated that the working group led by Mr Ahtela had found a sufficient range of measures to lengthen working lives. However, in contrast, EK claimed that the outcome of the talks was insufficient.

No consensus on raising retirement age

The other working group, chaired by the Head of the Centre for Pensions (Eläketurvakeskus), Jukka Rantala, has made far less progress, missing its deadline and failing to make a similar announcement. The government had hoped that the Rantala working group would be able to produce an agreement between the trade unions and employers on raising the general retirement age.

Disagreement over increasing the retirement age has delayed the accomplishment of this working group. It has been dealing with a number of particularly difficult issues. The most contentious of these are calls for an increase in the retirement age, and the elimination of the so-called ‘unemployment tunnel’, whereby older unemployed persons (58 years or older) have an extra long period of income-related unemployment benefit. In this way, they can transfer from unemployment to their pension.

EK has called for the abolition of the unemployment tunnel, which allows for a smooth transition to retirement for older unemployed persons. However, the trade union side wants to keep the existing system. Employers and trade union representatives failed to bridge the gap on increasing the statutory age of retirement by three years. The unions have rejected any increase, while the employers want people to retire later than the current average retirement age of 63 years.

Employers also want to remove income-related unemployment benefit for people made redundant at the age of 58 years or over. As noted, this benefit has enabled employees to take a form of early retirement before reaching the statutory retirement age and eligibility for a full pension at the age of 63 years. The trade unions have argued that employers themselves are to blame for this situation by dismissing older workers first.

Slight rise in real retirement age

A key objective of the government is to raise the average retirement age ‘by at least three years’ by 2025. Surprisingly, according to new data from Statistics Finland (Tilastokeskus), the average retirement age in Finland rose from 59.4 years in 2008 to 59.8 years in 2009, despite the ongoing economic recession and mounting unemployment. In comparison, the average pension age over 10 years ago, in 1999, was below 59 years of age.

Pertti Jokivuori, Statistics Finland