FINLAND - The real value of earnings-related pensions could increase by 50% during the next 20 years, with the real value of pensions set to double by 2050.
According to the Finnish Centre for Pensions (ETK), people born in 1945 will receive a pension amounting to 46-58% of the wage after 32-36 years of work.
When the equalising effect of taxation is taken into account, the amount of the pension compared with the salary for the last years in employment, otherwise known as the “replacement rate”, increases by 7-9 percentage points.
“If the employees’ earnings level increases at a slower rate than assumed, the real value of pensions will also increase less rapidly,” said Hannu Uusitalo, ETK director.
According to the report, replacement rates remain nearly unchanged up to the age group born in 1960, after which they decrease. For persons born in 1980, the replacement rates are a couple of percentage points lower than for those born in 1945.
The research also found that an extension of the working career beyond age 63 could have a significant effect on the replacement rate. An extension of the working career by three years after age 63 or 65 was found to increase the replacement rate of pensions by more than 8%.
In related findings, the report said the average earnings-related pension will increase in relation to the wage level during the next 10 to 15 years, but it noted that the ratio of pensions to wages will start decreasing around 2020, and in 2050 the relative level of pensions will be a few percentage points lower than at present.
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