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The life expectancy coefficient is a mechanism which affects the amount of pension granted and is used by the pension system to prepare for the increase in life expectancy. If the average life expectancy in Finland continues to rise, the life expectancy coefficient will reduce monthly pensions.
Life expectancy coefficient
affects pensions for the first time in 2010
applies old-age pensions to persons born in 1948 or later.
How is the life expectancy coefficient determined?
The life expectancy coefficient is defined separately for each age group at the age of 62 using the mortality statistics for the five previous years. This coefficient is then used to calculate the old-age pension regardless of at what age the person is retiring.
If the old-age pension starts at the age of 62, the coefficient for the year in which the pension starts is used.
The life expectancy coefficient is annually approved by the Ministry of Social Affairs and Health. An old-age pension or early old-age pension starting in 2010 will be multiplied by the life expectancy coefficient 0.99170.
If, for instance, the earnings-related pension of a person born in 1948 was 1,600 euros before taking the life expectancy coefficient into account, the pension re-valued using the coefficient would amount to approximately 1,587 euros.
The life expectancy coefficient is applied to those disability pensions which will be granted based on the onset of disability in 2010 or later.
The life expectancy coefficient is also applied to the disability pension when it begins. The coefficient, however, only affects that part of the pension which is based on the work performed before the onset of the disability. The disability pension also includes the pension component for projected pensionable service which is based on the time remaining until the start of the retirement age, and the coefficient is not applied to this component.
The idea behind the life expectancy coefficient is that part of the extended life expectancy is used to continue at work.
Although the life expectancy coefficient reduces the pension, you can increase it by working for longer.