A sustainable pension system benefits everyone

Pensions are one of the most important themes related to intergenerational policy, and that is why they should be of interest to everyone. The Finnish pension system is an intergenerational agreement, and its benefits and costs should be divided fairly between different generations. The goal of the pension reform in 2017 was to stop pension contributions from increasing. However, in a recent report by the Finnish Centre for Pensions, the future looks grim, as it shows that there is pressure to increase pension contributions even further.

The Finnish pension system has been built in such a way that the employees and employers of today pay for the pensions of the people who are now retired. This is why the relative number of employees and pensioners plays a key role in the stability and sustainability of the system. It should also be noted that, due to the system’s structures, the return on pension contributions is lower for younger generations than for current and former pensioners.

The birth rate in Finland has been declining for a long time, while net migration has become negative. At the moment, an unreasonable burden of preserving the welfare state is being placed on the shoulders of young and future generations, as generations are becoming smaller and smaller in size and the career and wage development of young people is going down. The growth of pension contributions that has been going on for decades has created pressure to lower other taxes to keep the overall tax rate stable. Lower tax revenue forces the government to cut down on benefits and services provided by the welfare state. Young generations will also need these services and benefits at different stages of their lives.

The decisions of the previous governments, which have included cuts to the funding of education, among other things, have targeted young people in particular – both current and future students. Making the student financial aid more loan-based has led to an increase in the debt burden of students, which is currently 3.6 billion euros. Concerns regarding income, the climate and one’s own future understandably create pressure that is reflected in the increasing number of mental health problems of students and young people. Every month, approximately one third of university students suffer from symptoms related to mental health.

In order to maintain an equal pension system, we have to make people’s careers longer. This requires making retraining easier and making part-time work possible towards the end of one’s career. At the same time, we must invest more in occupational well-being and coping at work. This requires measures to improve students’ well-being and mental health already during their studies. We must also make sure that everybody who has studied and completed a degree in Finland can choose to stay and work here if they want to.

The pension system should be fair. It should not be reformed solely on the terms of the current pensioners, but rather examined in a sustainable way also from the point of view of young people. To improve the dependency ratio, we must make sure that as many young people as possible can enter the labour market and maintain their ability to work until the end of their careers.


Helmi Andersson

SYL Board Member

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