The finnish pension system from a comparative nordic perspective1

Abstract

The Nordic welfare states have managed to reform their pension systems in a way that supports both high employments rates and low old-age poverty. This ability to innovate and acquire acceptance for the new rules are the key elements behind the success of these systems. The role of social partners has been decisive in previous reforms, but the needs to increase employment rates and improve overall fiscal sustainability have introduced additional constraints for the reforms and have increased the influence of politicians. From the very beginning, the Finnish first-pillar earnings-related pension scheme has had several outstanding features, such as partial prefunding of the contributions, no ceilings for the pension accruals and preserving accruals when changing jobs. In recent years, the scheme has been at the front line of introducing links between pensions and retirement ages and life expectancy. However, the recent issue of the surprisingly low fertility has not yet been addressed.