How Do Intentions Affect Future Retirement? A Case Study of the Finnish Flexible Old-Age Pension Scheme

Published date01 June 2012
Date01 June 2012
European Jour nal of Social Secu rity, Volume 14 (2012), No. 2 111
E T*, S K**,
MT *** and K K ****
e aim of this study is to examine the factors that impact on older employees in their
plans to continue at work or to retire, and to  nd out to what extent retirement plans
are actually realised.  e frame of reference for the study is Beehr’s model (1986) of the
retirement process. It con sists of three stages: retirement preferences (thought s about
retirement), retirement intentions, and retirement outcomes. In this study, two stages
of Beehr’s model have been ex amined: retirement intentions and realised retirement.
Retirement  gures from the register data showed that people h ave retired somewhat
later than they planned. Slig htly more than half of the older employees retired when they
intended, a third retired later, and a small proportion retired earlie r than they intended.
Intentions to continue working longer were explained by many personal and work-
related factors, most of which are consistent with earlier studies on retirement plans,
whereas realised retirement was la rgely explained by work-related factors.  e centrality
of work, a short working career and  nancial incentives to cont inue working were the best
predictors of late retirement. With reference to Beehr, we conclude that di erent factors
are emphasised as ex planatory variables at di erent stage s of the retirement process.
Keywords: exible retirement age; retirement intentions; retirement outcome;
working condit ions
* Dr Eila Tuominen (correspondi ng author) is Research Manager at t he Finnish Centre for Pensions.
Address: FI-0 0065 Eläketu rvakeskus, Fi nland; tel. +358 294 11 2151; e-mail: eila.tuom inen@etk. .
** Seppo Karis almi is a Rese archer at the Finn ish Centre for Pensions. Add ress: FI-00 065
Eläketur vakeskus, Fi nland; e-mail: sepp o.karisalm i@saunalahti. .
*** Mervi Taka la is a Senior Resea rcher at the Finnis h Centre for Pensions. Addre ss: FI-000 65
Eläketu rvakeskus, Fi nland; e-mail: mer vi.takal a@etk. .
**** Dr Kasimir K aliva is a Stat istician at the Nat ional Instit ute of Health and Welfare . Address: P.O. Box
30, FI-00271 Helsi nki, Finland ; e-mail: kasim ir.kaliva@t hl. .
112 Intersentia
Eila Tuominen, Seppo Ka risalmi, Mer vi Takala and Kasi mir Kaliva
A  exible retirement age in statutory pension schemes is stil l fairly uncommon.
A few countries adopted the  exible retirement age in the 1990s and t he 2000s,
including France, Italy a nd Sweden. In Finland a  exible old-age pension scheme w as
introduced in the 2005 pension reform when substantial amendments were made to
pension legislation. A person can ret ire on an unreduced old-age pension at the age of
63 instead of at the previously  xed reti rement age of 65. At the same time, signi cant
nancial incentives to conti nue to work were introduced. For those continuing to work,
pension is accrued at an accelerated rate bet ween the ages of 63 and 67 (4.5 per cent of
the annual ea rnings). Limiting the possibilit y of retiring early and  nancial incentives
to continue to work are expected to encour age people to postpone retirement.
It is important to know whether t he amendments made to the pension scheme are
e ective; i .e. whether the  ex ible retir ement age is a n incentive to continui ng to work,
and to determine the impact of  nancial incentives on the choice of retirement age.
External factors, particularly business  uctuations, may also have an impact on the
take-up of  exible retirement. During a re cession a  ex ible system o ers t he possibility
of an early exit from the la bour market, whereas during periods of economic growt h
the demand on the elderly work force is likely to increase .
e aim of this study is to examine the retirement intentions and the realisation
of these intentions for individuals approaching retirement. We begin by examining
whether those who are approaching ret irement age intend to take up the option of
exible retirement, whether they are interested in continuing to work a er the age of
63, or whether they wish to ret ire before the lower age limit for  exible reti rement. By
using register data, we  rstly a nalyse whether older employees retire as they i ntended.
Secondly, we examine which factors a ect the retirement plans of older employees
and, in part icular, their plans to continue working. Our th ird objective is to examine
those factors that a ect the realised retirement age, especially those factors which
explain late retirement. We also pose t he question of whether the factors that explain
retirement intent ions and realised ret irement di er from one another.
Our research data is t he Flexible Retirement Age Study carrie d out by the Finnish
Centre for Pensions and the Finnish Pension Alli ance TELA in 2003. Its target group
was those born between 1940 a nd 1945 who were employed in the private sector or in
local government at the time of t he survey. Retirement register data from 2003–2009
has been added to the survey data.  e research data and restr ictions applied to the
study are presented in detai l in Section 3 below.
Conceptua lising retirement in terms of decision-making emphasises retirement as
motivated choice b ehaviour.  is approach assu mes that older employees make their

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