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Planned social, health reforms call for changes to pension system, working group says

A government working group has proposed merging private and public pension systems in Finland.

Kunta-alan ja valtion eläkevakuutusyhtiö Keva
File photo of Keva logo. Image: Petteri Paalasmaa / AOP

If government's plans to overhaul the social and health care system (known colloquially as "sote") proceed, they will require further reforms to the national pension system, a government working group said on Tuesday.

The group was appointed by the finance and social affairs and health ministries, and consists of ministry experts, members of major trade unions and employer groups, municipality unions and representatives of the business community.

The group has proposed a merger of the country's private and public pension systems, saying that the national pension agency Keva should establish a new pension insurance firm that can assume responsibility for the pensions of workers in the private sector.

When and if Finland makes long-planned reforms to its social and health care system, private companies are expected to play increasingly major roles within those sectors. In practice, that will mean that several thousand publicly-employed health and social care workers will be transferred from the public to the private sector.

As the number of municipal workers decreases, there will be a parallel decrease in pension payments at the municipal level. Keva, which operates the municipal pension system, risks losing both clients and money. On top of that, according to the working group, the municipal finances will also weaken.

Keva CEO, Timo Kietäväinen, said decision-makers in Finland have talked about possible reforms to the pension system for 20 years.

"But this is the first time that anyone even tried to examine whether a reform is actually possible," Kietäväinen said.

Keva is Finland's largest pension provider

Chair of the working group and director of the Finnish Centre for Pensions, Heli Backman, said systemic reforms of the pension system would solve the issue of workers making the public to private shift.

Keva is Finland's largest pension insurance firm; it has around 1.2 million clients who work in the public sector and employs about 550 workers. Keva's investment holdings amount to around 50 billion euros.

According to the working group, merging the public and private pension systems should be cost neutral. It added that pension premiums and fees should not change in the long run - for workers or their employers. The reforms should not affect pension levels for affected workers, either, according to the group.

After any eventual reforms, public workers should be protected by the same laws that shield private sector workers, the working group said.

Future uncertain

The exact form eventual pension system reforms will take is heavily dependent upon how "sote" reforms take shape - when and if they do.

With little time left before the parliamentary elections in April, it remains unclear whether Prime Minister Juha Sipilä's government will be able to get the reforms implemented as planned.

The Constitutional Law Committee has not yet approved the reforms and there is the possibility that the broad reform package could collapse - or be watered down before it gets a green light.

Despite these unknown factors, the working group said that the current separate pension systems are also problematic in light of other major organisational changes affecting the public and private sectors.

Minister of Local Government and Public Reforms Anu Vehviläinen has recommended that the working group send its report for referral so that the next government will be able to work on the reforms further.

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