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Government to phase out pension pipeline by 2025

The Ministry of Finance announced new measures to improve employment among the over-55s.

Hallituspuolueiden puheenjohtajaviisikko eli oikeusministeri Anna-Maja Henriksson, opetusministeri Li Andersson, pääministeri Sanna Marin, sisäministeri Maria Ohisalo sekä tiede- ja kulttuuriministeri Annika Saarikko.
Government party leaders outlined employment measures affecting workers over the age of 55. Authors at a press conference on Thursday. Image: Heikki Saukkomaa / Lehtikuva
Yle News

Government parties have come to an agreement to scrap the ‘pension pipeline’, an enhanced unemployment benefits scheme offered to older people in Finland.

The agreement came after Finland's unions and employer organisations failed to secure a deal on eliminating the pension pipeline earlier in the year, in a blow to Finland's system of tripartite labour market negotiation.

The scheme (eläkeputki in Finnish) allowed workers close to retirement age who become unemployed to claim higher, income-linked jobless benefits for an extended period until they can claim their pension.

These benefits are normally paid for a limited period before claimants drop to a lower rate, but the pension pipeline maintains the income-linked benefits until they are eligible for pensions.

Economists and unions however feared this scheme was having the effect of encouraging employers to lay off older workers when making job cuts and was being seen as a reason for lower employment rates among older workers.

The government announced on Thursday it will be tightening the terms of the pension pipeline from 2023 onwards and completely phasing out the scheme by 2025.

“The government aims to improve employment through structural reforms. The impact of the decisions will result in the employment of 10,300 additional people,” Prime Minister Sanna Marin (SDP) said at the press confeence.

Those born in 1965 and after will not be eligible for a pension pipeline.

The decision will not affect those who are already in the pension pipeline or those who enter the scheme before the changes take effect in 2023.

Left demands new measures

Of the government parties, the Left Alliance was most reluctant to abolish the scheme. The party's parliamentary group finally approved the decision in Thursday's meeting.

"It is no secret that the Left has not considered it justified in this economic situation. Our primary concern has been to secure the livelihoods of people who lose their jobs anyway," Left leader and Minister of Education Li Andersson said.

As a countermeasure, the party has demanded measures to improve livelihoods, employment services and unemployment security of those over 55 years of age.

The government compiled its solution on the basis of proposals from the Confederation of Finnish Industries and the trade unions.

Improved financial security

The abolition of the pension pipeline will be softened by a set of measures to improve the financial security and employment prospects of the unemployed over-55s.

If a person over the age of 55 who has been with the same employer for more than five years gets dismissed, on top of the current “change security” benefits, he or she will also get a package that consists of a training allowance worth two months' salary and a severance grant worth one month's salary.

“It is a balanced measure that takes into account the interests of the taxpayer, the needs of the employee and the perspective of the employer. The obligations of employers will not increase much,” Centre party leader and Minister of Science and Culture Annika Saarikko said.

The employment fund will finance the increase in the “change security” benefits. The new severance pay will not postpone the start date of the unemployment benefit.

Wage subsidy improvements for workers over 55

From 2023, employers will get more subsidies to employ people over the age of 55.

Recipients have to be unemployed for two years during a period of two years and four months to be eligible.

PM Marin said that the government has only fulfilled the first part of its employment promises.

“The government's work to raise the employment rate will not end there, but the government will take employment measures to strengthen the economy during the government term, with the aim of achieving an employment effect of 80,000 additional employees," Marin said.

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