News - 29.09.2014 klo 08.23

Labour market organisations agree to employment pension reform

Labour market organisations agree to employment pension reform

The intense negotiations between labour market organisations concerning employment pension reform have ended with many proposed changes to the existing system. The agreement was signed by two of the three trade union confederations.

The minimum retirement age will be raised gradually from 63 to 65 for persons born after 1955. Also, the system of accumulation of pensions will change.

At the moment the pension system offers an incentive to keep people in working life longer a with better pension accrual the longer one works. The usual 1.5 per cent of earnings accrual per year is to be raised to 1.9 per cent for each working year between the ages of 53 and 62 and to 4.5 per cent from age 63.

In the new agreement the pension accrual will be 1.5 per cent in a year of employees' entire earnings throughout their working careers between the ages of 17 and 65.

According to the agreement those working in physically or mentally demanding jobs will have the possibility to retire at the age of 63, providing their career has spanned at least 38 years.

If the labour market organsations' agreement is accepted by Government and Parliament, the new system will come into effect in 2017.

Confederations not unanimous

The Central Organisation of Finnish Trade Unions SAK and the Finnish Confederation of Professionals STTK signed the agreement, following a vote by their executive bodies. The Confederation of Unions for Professional and Managerial Staff in Finland Akava rejected the deal unanimously. The employers' federations also signed the agreement.

“Protecting the future pensions of the present younger generation was a key objective for SAK. We were also equally concerned to ensure a respectable retirement path for older employees,” SAK chairperson Lauri Lyly stresses.

SAK sees it as being vitally important that those in physically or mentally demanding jobs will have the possibility to earlier retirement. It also believes that pensions will become more equitable when future pension eligibility accrues more steadily throughout the working career.

STTK Chairperson Antti Palola views the deal as an example of how trade union movement - once again - is ready to shoulder its responsibility.

” Pension reform is one of the major social reforms in Finland in decades and in Finland's best interest.” If the goals are achieved, the retirement age will rise, sustainable financing will guarantee pensions for our youth and the sustainability cap of the public economy will diminish, Palola says.

The pension accrual will no longer exclude the employee's earnings-related pension contribution element. This is more favourable for employees, Palola adds.

The agreement is fair for both men and women, Palola believes. According to the agreement up to 3 years of maternity, paternity and parental leave may be included in this working career.

Akava Chairperson Sture Fjäder said that the agreement do not include such elements, that would make working careers longer, which is one of the main goals of the reform. ”There are no incentives, higher accrual just before pension age. These should have been included to make it possible for Akava to sign up to the agreement.”

Akava believes the new system does not encourage or offer an incentive to people to continue with their working life until retirement age. It is also critical of the fact that working up to between 63 and 65 will increase pensions only a fraction higher than they are today.

Akava had also hoped that the agreement should have included more possibilities for employees to influence their working conditions in order to continue longer in working life.

Written by: Heikki Jokinen