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One in ten now collecting early partial pension

Since 2017 it has been possible for Finnish employees past the age of 61 to start collecting 25 to 50 percent of their accrued pension before they retire.

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Image: Ismo Pekkarinen / AOP

Eighteen months after Finland's series of pension reforms, one-tenth of workers have elected to use a new retirement option known as 'partial old-age pension'.

The new system allows 61 year-olds to draw a quarter or half of their accrued pension for several years before they officially retire. For those with an accrued monthly pension of 1,000 euros, for example, there is an option of receiving either 250 or 500 euros monthly. The option reduces the monthly pension by 4.8 percent or 24 euros annually, in this example.

The reform is meant to keep people in working life longer by allowing them to start drawing their old-age pension in portions before reaching retirement age. For example, an employee can transition into retirement by moving to a part-time position, using their partial pension to help them make ends meet until they retire. In June, the Finnish Centre for Pensions reported on a poll that showed 10 percent of pensioners were struggling financially.

Early option cuts into future pension payments

Tiina Palotie-Heino, statistics head for the Finnish Centre for Pensions, says that on the whole, the new pension option has not been hugely popular.

"Around one out of every ten people who qualify for the new partial old-age pension has taken advantage of the new option. On a yearly level, this makes for about ten thousand early retirees," she says.

Although the percentage of people who have signed up for the new option is low, she says it has generated uniform interest throughout the country among ordinary wage earners.

"Most of the people who have chosen to do it have elected to draw 50 percent of their accrued pension, making the average rate around 800 euros a month."

Palotie-Heino reminds people in Finland that opting into the early retirement programme also slightly cuts into their future pension payouts.

"The earlier someone starts drawing their pension, the larger price they will pay. At this stage, the average monthly loss will be 70 euros per month for as long as they draw a pension. That's the price of accessing the money early," she says.

75,000 new pensioners in 2016 and 2017

According to the Finnish Centre for Pensions, at the end of 2017 a total of 1,485,000 people in Finland were receiving an earnings-related pension, an increase of 28,000 from the year before. This total includes the 75,000 people who began their retirement last year, roughly the same number of people who retired in 2016.

The centre says the number of people retiring in Finland will now start decreasing, as most of the baby boomer generation has already made the transition to retirement.

Another part of the 2017 pension reform is an incremental rise in the retirement age from the current 63 to 65 by the year 2025.

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