Online pension calculators of banks to be used with caution

Online pension calculators used by banks on their websites give the wrong idea of the statutory earnings-related pension. A study by the Finnish Centre for Pensions revealed several flaws in the banks’ pension calculators.

Estimates of future earnings-related pension are usually low, since it is not possible to change the retirement age when performing the calculation. Banks utilize the calculators when marketing voluntary pension insurance and long-term savings accounts on their websites.

”It is a good thing that people are interested in their own pensions” says special expert Antti Mielonen from the Finnish Centre for Pensions, who carried out the study.

As an expert in pension provision, he emphasizes the importance of everyone having access to reliable basic information before using the calculators. Your own pension provider can give you the most accurate estimate of the level of your future earnings-related pension.

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Earnings-related pension is accrued for periods of study

Many jobs require extensive education. For studies leading to a degree and lasting for no more than five years, pension is accrued as if the student were working and earning EUR 644.56 per month.

Pension for periods of study is awarded providing that the person earns an additional EUR 15,500 during his or her working career. Questions for young adults >>

Pension provision also for people on a scholarship

A post-graduate student on a grant or a scholarship (e.g. a researcher who funds his or her research in the sciences or arts with a scholarship) granted in Finland must insure his or her work if it lasts for more than four months and if the scholarship granted exceeds EUR 280 per month. The pension insurance includes an occupational accident insurance and entitles the insured to certain daily allowance benefits. Furtermore, it clarifies the insured's unemployment security. Grant >>

Guarantee pension for those with low income

The national pension security will be supplemented with a guarantee pension as of March 2011. This will improve the income in particular of the disabled and those who have been ill since childhoold. The guarantee pension must be applied from Kela. The guarantee pension will provide everyone with a minimum monthly pension of EUR 685. For more information, go to Kela's web site.

The disabled want to engage in gainful employment

Many retirees on a disability pension do have the ability to work to some extent. The Finnish Centre for Pensions has studied their desire to engage in gainful employment and its effect on employment.

Of the 217,000 people on a disability pension, approximately 19,000, i.e. less than ten per cent, engage in gainful employment. In addition, one of six, i.e. 33,500, would like to work.

If all those who would like to work were employed, the employment rate would increase by as much as one percentage point. In countries which prevent retirement on a disability pension and which promote the employment of those on partial disability pension, the population's time in employment is longer than in Finland.

One million retirees on old-age pension within the earnings-related pension scheme

Earnings-related pension providers pay out old-age pension to more than one million retirees. The record-breaking limit of one million retirees on old-age pension was reached in April this year.

Last year, over 80,000 persons retired in Finland, more than at any point in the entire history of pension provision. The baby-boom generations born at the end of the 1940s are now reaching the age of old-age retirement.

More than 1.4 million persons receive an earnings-related or a national pension. More and more often, old-age pension consists only of an earnings-related pension.

The majority of retirees are on old-age pension. Other types of pensions are disability, unemployment and survivors' pensions.

Get a better grasp of your pension

Most people are interested to know the amount of their future pension. There is no better source than the pension record. The pension record is sent annually to approximately three million people in Finland. The electronic pension record is available at any time from the web pages of your pension provider or here at tyoelake.fi (in Finnish or Swedish).
 
The pension record displays the amount of pension provision that has accrued from private-sector gainful employment, self-employment and unsalaried periods.
Many have worked in the public sector, with the state, a municipality or the Church as their employer. Pension data from all public sector employment is available from the Local Government Pensions Institution, including data from the Church Council and the web or customer service of the State Treasury. A joint pension record for the private and public sectors is planned for 2012.

Rate of disability pensions increases

The disability pension rate rose at the turn of the year, and a person already retired may now earn up to EUR 600 without this having a negative effect on the disability pension.
A recipient of a full disability pension may earn 40 per cent of the salary or income from work that forms the basis of the pension. It will also be possible to leave the pension dormant, if the earnings level is exceeded. The pension becomes payable again without a new evaluation of working capacity, once the earnings level is no longer exceeded. The pension may be left dormant for at most two years.

The accrual rate of the pension component for projected pensionable service will rise from 1.3 per cent to 1.5 per cent, and in the beginning of 2010 a lump-sum increase will be made to the pensions of those who have become disabled before the age of 51. The increase is age-determined.

The life expectancy coefficient starts affecting pensions for the first time in 2010. It concerns the old-age pensions of those born in 1948. It also concerns persons whose disability begins in 2010.