Pension reform 2017

The pension reform entered into force on 1 January 2017. As part of the reform, the Local Government Pensions Act, the State Employees’ Pensions Act and the Evangelical Lutheran Church Pensions Act were amalgamated into a new Public Sector Pensions Act, which also applies to the employees of the Social Insurance Institution Kela.

Reform highlights

  • Part-time pension was discontinued and replaced by partial early old-age pension.
  • Early old-age pension was discontinued and is no longer available.
  • Years-of-service pension was introduced as a new type of pension.
  • Starting in 2018, the lowest age limit for retirement will rise gradually from 63 to 65.
  • The accrual of pension starts already at the age of 17 (as of 2017). Pension accrues at a rate of 1.5% of earnings.
  • You can receive a deferment increment of 0.4% in your pension for each month of continued employment after reaching the lowest age of eligibility for old-age pension applicable to your age group.

The reforms are discussed in greater detail below.

For information about Keva and the earnings-related pension system, please see the page Am I eligible for pension from Keva?

For more information about the pension reform, please see http://www.elakeuudistus.fi/briefly-in-english.html

Who are excluded from the effects of the reform?

The pension reform will not affect the pensions of current pension recipients or those retiring in 2016. The rise in retirement age does not apply to people born in or before 1954.

Part-time pensions in payment will continue normally and the conditions for the payment of the pension remain the same. The income limits for part-time work are determined as before.

What remains the same?

  • Personal retirement age (between 63 and 65) remained unchanged.
  • Disability pension and partial disability pension as well as their criteria remained unchanged.
  • Additional days on unemployment benefits, i.e. the unemployment pathway to retirement, remained unchanged.
  • Pension accruals in unpaid periods (e.g. family leaves, unemployment, sickness allowance, job alternation leave) remained unchanged.
  • No changes were made to survivors’ pension.
  • Pension accrues for working while on pension at a rate of 1.5% per year as before.

General retirement age

The lowest age of eligibility for old-age pension will be raised gradually from the current 63. The earlier retirement age of 63 continues to apply to people born before 1955.

For people born in 1955 the retirement age rose by three months, in 1956 by six months, and so on, so that the lowest retirement age for people born in 1962–1964 will be 65. The lowest retirement age for people born in or after 1965 will be determined at a later date.

Year of birth

Lowest age limit
for retirement

Upper age limit
for accrual

1954

63 y

68 y

1955

63 y 3 m

68 y

1956

63 y 6 m

68 y

1957

63 y 9 m

68 y

1958

64 y

69 y

1959

64 y 3 m

69 y

1960

64 y 6 m

69 y

1961

64 y 9 m

69 y

1962-1964

65 y

70 y

1965-

to be confirmed

to be confirmed

Target retirement age

A target retirement age that is higher than the lowest retirement age will also be calculated for each age group. The target retirement age refers to an age where the amount of pension is roughly equal to the pension that would be received at the lowest retirement age without the reduction caused by the life expectancy coefficient.

For a person born in 1955, for example, the lowest age of eligibility for retirement on old-age pension is 63 years and 3 months and the target retirement age is approximately 64 years 3 months. Continuing at work until the target age of retirement delivers roughly the same amount of pension as would have been received at the age of 63 years 3 months without the reduction caused by the life expectancy coefficient. 

Personal age of eligibility for retirement on old-age pension

When employment in the public sector started before 1993 and has continued without interruption, the employee has a ’personal age of eligibility for retirement on old-age pension’ which is usually higher than the lowest age of eligibility for retirement on old-age pension.

The personal age of eligibility for retirement on old-age pension did not change as part of the pension reform. Continuing at work until personal age of eligibility means a higher pension accrual for the period prior to 1995. While retirement on old-age pension at the lowest age of eligibility is an option, in such a case the pension which has accrued prior to 1995 will be reduced. 

Occupational retirement age

The public sector used to have occupational retirement ages that were lower than the general retirement age. Occupational retirement ages have now been eliminated but those who have obtained one may hold on to it if they choose.

Occupational retirement ages are now being gradually raised. The new retirement age depends on when the retirement age would have been reached according to the earlier regulations. If the earlier retirement age was or will be reached in 2016 or 2017, the retirement age remains unchanged. If the earlier retirement age will be reached in 2018 or 2019, the new retirement age will be three or six months higher, respectively, and so on.

Occupational retirement age reached according to earlier regulations

Increase in occupational retirement age

2018

+ 3 m

2019

+ 6 m

2020

+ 9 m

2021

+ 1 y

2022

+ 1 y 3 m

2023

+ 1 y 6 m

2024

+ 1 y 9 m

2025 and   after

+ 2 y

Occupational retirement age may not exceed the lowest age of eligibility for retirement on old-age pension applicable to the age group, however.

Deferment increment and other changes

As of 1 January 2017, pension will accrue at a rate of 1.5% of annual earnings, except for people born in 1954–1972 to whom pension will accrue at a rate of 1.7% of annual earnings from the age of 53 until they turn 63. The super accrual of 4.5% for people aged 63 or older was eliminated effective 1 January 2017.

In calculating pension, the employee’s pension contribution will no longer be deducted from earnings.

The accrual of pension ends upon turning 68. However, pension will continue to accrue until the age of 69 and 70 for people born in 1958–1961 and in 1962 and later, respectively.

The life expectancy coefficient will reduce pension as before.

A deferment increment will be added to the pension when the pension starts after the lowest retirement age for the age group. The deferment increment is 0.4% per each month of deferment.

If, for example, a person born in 1955 works until the age of 64, the deferment increment is calculated from the lowest retirement age (63 years 3 months) until the start of pension, i.e. for a period of 9 months. The deferment increment will be 9 x 0.4% = 3.6% of amount of pension.