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Finance Ministry aiming to raise early retirement age to boost employment

Officials say they want to end the pathway from long-term unemployment to early retirement.

Iäkäs nainen kasvomaski kasvoillaan.
In Finland the retirement age is linked to a person's birth year. Image: Retu Liikanen / Yle

Finland’s Finance Ministry on Friday said it wants to remove the unemployment pathway to early retirement (eläkeputki in Finnish) to help improve the employment rate.

The system allows long-term unemployed individuals who are near retirement age to extend their maximum unemployment allowance periods beyond 500 days until they retire.

Ministry officials also proposed other measures to make it more difficult for people to leave the workforce before reaching pension age. The ministry said these changes would aim to bring 60,000 people into the workforce--a figure outlined in the government's programme.

The ministry pointed out that neighbouring Sweden does a much better job of keeping over-55s in the labour force. That said, officials suggested Finland follow Sweden’s example in removing channels for early retirement. They said Finland should instead find ways of helping older workers remain in their jobs.

While the finance ministry’s proposal does not tie the government’s hands, their officials play a central role in approving employment measures. The economic blow dealt by the coronavirus pandemic is expected to add further pressure on raising the employment rate in upcoming budget negotiations.

On Wednesday, Finance Minister Matti Vanhanen (CEN) unveiled a 61.6-billion-euro budget for 2021, noting that the proposal is based on the assumption that the government has already dealt with the worst of the coronavirus crisis.

Minister aims to raise retirement age

During his tenure as premier in 2009, Vanhanen proposed raising the country's retirement age to 65. As he tried to move the issue forward, Vanhanen was faced with resistance from labour unions and citizens as well as opposition parties.

However, nearly a decade later, significant pension reforms came into force in 2017, increasing the earliest eligibility age for old-age pension by three months per year until the year 2027, starting with people born in 1955.

For workers born after 1964, the retirement age will be linked to future life expectancy. For example, people born in 1970 will be eligible to retire one month short of their 66th birthday, while people born in 1995 will have to wait until they are over 68 years of age to retire.

Early retirement is still possible, but comes at the cost of lower monthly pension payments.

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