Finnish pension system ranked 7th globally

Although in the top ten for reliability, in terms of the adequacy of pensions, the Finnish system came in 13th place.

Despite some shortcomings, the Finnish pension system is still seen as one of the best in the world. Image: Henrietta Hassinen / Yle

The Finnish pension system has been ranked seventh in a comparison of 43 countries carried out for the Mercer CFA Institute Global Pension Index.

Iceland's pension system was number one in the comparison, followed by the Netherlands and Denmark.

The Mercer CFA Institute Global Pension Index is an annual comparison now in its 13th year. The index assesses pension schemes from the perspectives of pension adequacy, system sustainability and integrity.

While Finland's total points improved slightly from last year's survey, it slipped down two places in the ranking. All of the Nordic countries are in the top ten, with Norway in fifth place and Sweden in eighth place.

The administration of Finnish pensions was once again deemed the most reliable and transparent in the world, but the country came in at 13th in terms of pension adequacy.

The Finnish pension system is seen as straightforward and transparent. The accrued pension follows the employee, despite change of workplace, and the accrued amount can be checked at any time on the pension record.

"Comparing neighbouring countries is always interesting. Slightly surprisingly, Norway ranked last among the Nordic countries in sustainability. Less surprising was that Sweden ranked last among the Nordic countries in pension adequacy. Finland ranked fourth among the Nordic countries in both sub-indices," Ismo Risku, Head of the Planning Department at the Finnish Centre for Pensions said in a Tuesday press release.

Last week, Yle News' All Points North podcast explored Finland's pension funding issues with economists who have differing ideas on how the country can balance growing pension outlays with other social protections.

Article continues below podcast player.

Long careers in Iceland

According to the Finnish Centre for Pensions, the Icelandic occupational pension scheme is fully funded, as is the case in Denmark and the Netherlands. In addition, Icelanders have long careers with a retirement age of 67 and a high employment rate for older workers. Iceland's minimum pension benefits are also considered to be at a good level.

In order to rise in this comparison, Finland should improve minimum pension security, the rate at which older members of the population are employed, as well as increase the savings rate of households and the funding rate of employment pension contributions.

The employment rate of older workers in the 55–64 year-old age group has increased significantly, by ten percentage points, in Finland over the past decade.

"Despite this, it is still clearly lower than in the other Nordic countries. In Sweden, for example, the employment rate of older people was almost ten percentage points higher than in Finland last year," the Finnish Centre for Pensions points out.

Risku told Yle radio on Tuesday morning that although Finland's seventh place among the 43 mainly developed countries surveyed is quite good, there are also features that could be further developed.

He pointed out that the top countries in the comparison, Iceland, the Netherlands and Denmark, stand out because their employment rates for older people are remarkably high, and they have been more willing to provide pension funding than in Finland.

Of the main three areas assessed in the comparison, Finland's lowest points came in the sustainability of the system. Risku said that this latest comparison backs the findings of a recent report which said current payments in Finland will not enough to cover future pensions.