Evaluation of the effect of the life expectancy coefficient
The life expectancy coefficient will affect pensions for the first time in
2010 and it concerns persons born in 1948 and later.
The life expectancy coefficient is a mechanism which affects the amount of
the old-age pension and a method to prepare for increasing longevity. If average
life expectancy continues to increase, the life expectancy coefficient will
reduce the monthly pensions. For instance, for persons born in 1948 the life
expectancy coefficient reduces the monthly pension by approximately one per
cent, according to current estimates.
The coefficient is determined separately for each age group at the age of 62
using mortality statistics for the five previous years. The starting old-age
pension is multiplied with this coefficient, regardless of the age at which the
person retires on an old-age pension. If the old-ahe pension starts at the age
of 62, the coefficient for the year when the pension starts is used.
The level of the pension may be improved by working longer. However, persons
who become disabled at a young age seldom have the possibility of doing that. As
regards disability pensions the life expectancy coefficient is therefore only
applied to the accrued component of the pension. In addition, the coefficient is
also less severe than when calculated according to the disabled person's own
year of birth.
The life expectancy coefficient is applied to the old-age pension which
follows the part-time pension, but no longer when the disability pension is
changed to an old-age pension.
One objective of the life expectancy coefficient is that part of the increase
in life expectancy is used to continue staying on at work. The life expectancy
coefficient functions both ways, meaning that if life expectancy decreases, the
coefficient increases the monthly pension.