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Title:The Finnish pension reform of 2005 PDF Logo
Authors:Lassila, Jukka
Valkonen, Tarmo
Issue Date:2006
Series/Report no.:ETLA Discussion Papers, The Research Institute of the Finnish Economy (ETLA) 1000
Abstract:A major reform in the Finnish private-sector earnings-related pension system came into effect on January 1st, 2005. It was negotiated in 2001 – 2002 between the central organisations of employers and trade unions and representatives of the central government. This paper describes the reform and analyses its effects on selected macroeconomic variables, on the pension system and on the position of different birth cohorts and different educational groups. The reform appears to be successful in many respects. It simplifies the private-sector pension system and makes it a model that other pension systems in Finland will converge to. The reform rewards postponing retirement. It curbs the increase in contribution rate without endangering the adequacy of replacement rates. The increase in labour supply will have beneficial welfare effects. The new system also responds rather well to uncertain future demographics. Despite this apparent success of the reform there remains a serious doubt of its adequacy, as contribution rates are still expected to rise by several percentage points.
Subjects:pension reform, population ageing, stochastic population simulations
JEL:H55
J11
Document Type:Working Paper
Appears in Collections:ETLA Discussion Papers, Research Institute of the Finnish Economy (ETLA)

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