Who Wants to Continue at Work? Finnish Pension Reform and the Future Plans of Older Workers
| Published date | 01 September 2005 |
| Date | 01 September 2005 |
| Author | Pauli Forma,Eila Tuominen,Irma Väänänen-Tomppo |
| DOI | 10.1177/138826270500700303 |
| Subject Matter | Article |
WHO WANTS TO CONTINUE AT WORK?
FINNISH PENSION REFORM AND THE FUTURE
PLANS OF OLDER WORKERS
PAULI FORMA,EILA TUOMINEN and IRMA VA
¨A
¨NA
¨NEN-TOMPPO*
Abstract
The ageing of the population challenges the financing of pensions in the future. As a
result, pension systems have been reformed in many countries. In addition to reforming
the financing principles of pensions, an important aim for social policy has become the
postponement of retirement. In Finland, pension reform came into force at the
beginning of 2005, with the aim, through a variety of measures, of encouraging workers
to stay on at work. Under the new system it is possible to retire flexibly between the ages
of 63 and 68. This article, using extensive survey-data, examines the plans of Finnish
wage and salary earners to continue working beyond the lowest pensionable age of 63.
First of all, it examines whether older Finnish workers on the whole intend to continue
working beyond the pensionable age and whether economic incentives increase their
intention to go on working. Secondly it analyses the way in which different socio-
demographic and socio-economic factors are related to plans to continue working. The
results show that Finns take quite a reserved attitude towards remaining at work in
spite of financial incentives. Moreover, those who plan to continue working are more
likely to be male, to be highly educated, to be private sector workers in good health and
to be individuals who live alone. Private pension arrangements and long work careers
decrease willingness to continue at work. Activities relating to the treatment of older
workers in the workplace as well as the demands of the job and the extent of control
over work also affect plans to go on working. Managerial work, features of the job and
job satisfaction are also important but less so than the aforementioned factors. All in all
the results show that the aim of postponing retirement will be hard to achieve since
most workers do not want to go on working and would rather retire as soon as possible.
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European Journal of Social Security, Volume 7 (2005), No. 3 227
* Pauli Forma, DPolSci, is a Professor in the Department of Social Policy, University of Turku, Turku,
FIN-20014, Finland; E-mail: pauli.forma@utu.fi. Eila Tuominen, DSocSci, is Head Researcher in the
Finnish Centre for Pensions, Helsinki, FIN-00520, Finland; E-mail: eila.tuominen@etk.fi. Irma
Va
¨a
¨na
¨nen-Tomppo, LPolSci, is a Senior Researcher in the State Treasury, Helsinki, FIN-00054,
Finland; E-mail: irma.vaananen-tomppo@statetreasury.fi
228 Intersentia
1. INTRODUCTION
In the last few years pension systems have been reformed in many countries and more
reforms are being planned. The main reasons for this are the age structure of the
population and the problem of financing pensions when the babyboomers, born after
the Second World War, retire. The reaction to this challenge has been to reform the
financing principles of pension systems in a direction that emphasises funding (see e.g.
Hinrichs 2000; Myles and Pierson 2001). On the other hand, postponing retirement
and extending working careers have become important social and political goals. For
example the European Union has emphasised the importance of the employment rate
of older workers for maintaining reasonable and lasting pension security (European
Commission 2002; 2003a; 2003b). As to pensions policy, changes in working life make
achieving the important target of extending working careers a challenge. Globalisation
has increased competition and companies’ performance targets. In addition, it has
polarised the qualification standards of workers and increased uncertainty in working
life (Gallie 2002). As labour markets change, the position of older workers is
particularly vulnerable (Jacobs, Kohli and Rein 1991; Hytti 2004).
The challenges that Finland is facing are even more severe than in other western
countries. The population of Finland is ageing faster than elsewhere and the labour
force-participation of older workers and the average age of withdrawal from work have
been comparatively low in recent years (OECD 2003; Bo
¨rsch-Supan 2005). These
features distinguish Finland from other Nordic countries as well as from the average of
OECD and EU countries. As a reaction to these challenges, the aim of the Finnish
pension policy has, since the early 1990s, been to postpone retirement by two to three
years (Komitean mietinto
¨1991).
Generally speaking, postponing retirement can be approached in three different
ways. First, the conditions for retirement can be tightened up by raising age limits or
abolishing early pension schemes. Secondly, economic incentives for continuing at
work can be increased by raising the pension accruals. Thirdly, it is possible to support
workers’ health and other important resources related to continuing at work and to
improve the conditions of working life. Several small changes were made to the
Finnish employment pension system during the 1990s (see Hinrichs and Kangas
2003). More recently, a reform that has been described as the greatest in the history of
the whole system, came into force at the beginning of 2005. Under this reform, early
retirement schemes have been pruned, the calculation rules for pensions have been
changed, the economic lure of continuing at work has been increased and the old-age
pension system has become more flexible.
Pauli Forma, Eila Tuominen and Irma Va
¨a
¨na
¨nen-Tomppo
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