Jari Kannisto: Effective retirement age in 2014

1. Effective Retirement Age
in 2014
Jari Kannisto
Development Manager
5 Feb. 2015

2. ETK/Kannisto Jari 5.2.2015
Content
• Number of new retirees on an earnings-related pension
• Development of effective retirement age
• Employment
• Working life expectancy
Finnish Centre for Pensions 2

3. ETK/Kannisto Jari 5.2.2015
Monitoring the aim to postpone the effective
retirement age
• Expected effective retirement age
– corresponds, in principle, to life expectancy
– depicts the average effective retirement age if the retirement
and mortality rates remain on the level of the review year
– independent of the demographic age structure
• Employment rate of the elderly
• Working life expectancy
– depicts the number of years in which a person at a certain age
can be expected to be in an employment relationship or work as
a self-employed person during his or her remaining life span
– based on a method that uses cross-sectional data on the
probability of death rates, labour force participation rates and
employment rates.
Finnish Centre for Pensions 3

4. ETK/Kannisto Jari 5.2.2015
Effective retirement age in 2014
• Effective retirement age
– 61.2 years (expected effective retirement age for a 25-year-old)
– 62.8 years (expected effective retirement age for a 50-year-old)
• Clearly rising effective retirement age
– the expected effective retirement age for a 25-year-old rose by
0.3 years compared to 2013
– the expected effective retirement age for a 50-year-old rose by
0.2 years compared to 2013
• Decreasing number of pension contingencies at age
before the earliest eligibility age for old-age retirement
Finnish Centre for Pensions 4

5. ETK/Kannisto Jari 5.2.2015
New retirees on an earnings-related pension
2004–2014, by pension type
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
90 000
2004 05 06 07 08 09 10 11 12 13 2014
Persons
Part-time pension*
Special pension
for farmers
Unemployment
pension
Disability pension
Early old-age
pension
Old-age pension
Finnish Centre for Pensions 5
In 2014, circa 70,300 persons retired on an earnings-related pension (excl. part-time pensions).
* Persons retiring on a part-time pension are not included in the figure of new retirees.

6. ETK/Kannisto Jari 5.2.2015
New retirees on an earnings-related pension,
by age
0
5 000
10 000
15 000
20 000
25 000
-54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69-
Persons
Age at onset of pension
2003 2009 2014
Finnish Centre for Pensions 6

7. ETK/Kannisto Jari 5.2.2015
Expected effective retirement age, all new
retirees on an earnings-related pension
Finnish Centre for Pensions 7
57,0
57,5
58,0
58,5
59,0
59,5
60,0
60,5
61,0
61,5
62,0
62,5
63,0
63,5
64,0
1996 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 2014
Expected effective
retirement age
For 25-year-olds
For 50-year-olds

8. ETK/Kannisto Jari 5.2.2015
Proportion of new retirees on an earnings-
related pension of all insured, 25–49-year-olds
Finnish Centre for Pensions 8
0,0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1,0
25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49
%
Age at end of statistical year
2012 2013 2014

9. ETK/Kannisto Jari 5.2.2015
Proportion of new retirees on an earnings-
related pension of all insured, 50–69-year-olds
Finnish Centre for Pensions 9
0
10
20
30
40
50
60
50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69
%
Age at end of statistical year
2012 2013 2014

10. ETK/Kannisto Jari 5.2.2015
Retirement on an earnings-related pension
in 2014 (1/2)
• 70,300 persons retired on an earnings-related pension
(3,000 less than in 2013)
• Number of new retirees on an old-age pension declined
by 3% compared to 2013
– more than 51,000 persons retired on an old-age pension
– more than 70% of all new retirees retired on an old-age pension
• Number of new retirees on a disability pension declined
by 8% compared to 2013
– 18,000 people retired on a disability pension. For the first time in
the 2000s, the number was less than 20,000 persons.
Finnish Centre for Pensions 10

11. ETK/Kannisto Jari 5.2.2015
Retirement on an earnings-related pension
in 2014 (2/2)
• Popularity of part-time pension declined clearly
– 3,400 persons retired on a part-time pension
– Age limit for persons born in 1953 is 60 years
– Age limit for persons born in 1954 or later is 61 years
• Decline in pension contingencies
– No differences between males and females
Finnish Centre for Pensions 11

12. ETK/Kannisto Jari 5.2.2015
58,0
58,5
59,0
59,5
60,0
60,5
61,0
61,5
62,0
62,5
63,0
63,5
64,0
64,5
65,0
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Expected effective retirement age:
aim and realisation
For a 25-year-old
Aim agreed on in 2013
structural policy
programme: 62.4 years
by 2025*
*Requires an annual increase of an ample 0.1 years from the 2012 level.
Finnish Centre for Pensions 12
Expected effective retirement age

13. ETK/Kannisto Jari 5.2.2015
Future (1/2)
Finnish Centre for Pensions 13
• For the main part, the direct effects of the legislative
amendments of the 2005 pension reform are now evident
in the effective retirement age
– the effective retirement age has risen and the selection of
pensions has been reduced
– impossible to assess the impact of the life expectancy coefficient at
this point
• Future development depends on changes in behaviour
– the retirement intentions have been extended
– many different factors affect the decision to retire

14. ETK/Kannisto Jari 5.2.2015
Future (2/2)
• Future development depends on economic outlook
• Future development depends on working life
improvements
• In 2015, the number of new retirees will be slightly
higher than in 2014
Finnish Centre for Pensions 14

15. ETK/Kannisto Jari 5.2.2015 Eläketurvakeskus 15
Employment rates of the working-aged population (15–64 years),
the young (25–34 years) and the elderly (55–64 years) in 2002–2014
0
10
20
30
40
50
60
70
80
90
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
%
15–64 yrs 25–34 yrs 55–64 yrs
Source: Labour Force Surveys 2002–2014, Statistics Finland
Finnish Centre for Pensions 15

16. ETK/Kannisto Jari 5.2.2015
Employment rates for 55–59-year-olds and
60–64-year-olds in 2002–2014
0
10
20
30
40
50
60
70
80
02 03 04 05 06 07 08 09 10 11 12 13 14 02 03 04 05 06 07 08 09 10 11 12 13 14
%
55–59-year-olds
60–64-year-olds
Source: Labour Force Surveys 2002–2014, Statistics Finland
Employment rates in 2014: 55–59-year-olds 74.1% and 60–64-year-olds 44.3%
Employment rates in 2013: 55–59-year-olds 73.4% and 60–64-year-olds 44.0%
Finnish Centre for Pensions 16

17. ETK/Kannisto Jari 5.2.2015
Employment rates for 55–67-year-olds in
2002, 2007, 2013 and 2014
Finnish Centre for Pensions 17
0
10
20
30
40
50
60
70
80
90
55 56 57 58 59 60 61 62 63 64 65 66 67
%
2002 2007 2013 2014
Source: Labour Force Surveys 2002–2014, Statistics Finland

18. ETK/Kannisto Jari 5.2.2015 Finnish Centre for Pensions 18
Employment rates for 55–59- and
60–64-year-olds in 2002–2014
0
1
2
3
4
5
6
7
8
9
10
11
02 04 06 08 10 12 14 02 04 06 08 10 12 14
%
55–59-year-olds
60–64-year-olds
Source: Labour Force Surveys 2002–2014, Statistics Finland
Employment rates in 2014: 55–59-year-olds 7.2% and 60–64-year-olds 7.3%
Employment rates in 2013: 55–59-year-olds 7.2% and 60–64-year-olds 6.5%

19. ETK/Kannisto Jari 5.2.2015
Source: Eurostat, Employment, Labour Force Surveys
0
10
20
30
40
50
60
70
80
90
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
%
Iceland
Sweden
Norway
Denmark
Finland
EU 17
EU 27
Finnish Centre for Pensions 19
Average employment rates of 55–64-year-
olds in Nordic and EU countries in 2003–2013

20. ETK/Kannisto Jari 5.2.2015
Age-cohort differences must be taken into account
in relation to the employment development of the
elderly (55–64-year-olds) (1/2)
• Overall employment rate has not improved since the
post-financial-crisis level
– employment rate of working-aged population in 2014: 68.3%
(decrease 0.2 percentage points since 2013)
– favourable employment development of the elderly in recent
years
– employment rate of 55–59-year-olds record high in statistical
history (73.4%)
– employment rate of 0–64-year-olds record high in statistical
history (44.3%)
– employment rate of 25–34-year-olds decreased as of 2008 by
6.0 percentage points (75.1% in 2014)
Finnish Centre for Pensions 20

21. ETK/Kannisto Jari 5.2.2015
Age-cohort differences must be taken into account
in relation to the employment development of the
elderly (55–64-year-olds) (2/2)
• Finland lags behind the other Nordic countries
regarding the employment of the elderly
– Closest to Finland is Denmark, which is a few percentage points
ahead of Finland – the gap has not narrowed
– The EU27 countries lag behind Finland by 8.2 percentage points
Finnish Centre for Pensions 21

22. ETK/Kannisto Jari 5.2.2015
Expected length of working life for
a 15-year-old 2000–2014
Finnish Centre for Pensions 22
0
5
10
15
20
25
30
35
40
2000 2002 2004 2006 2008 2010 2012 2014
Years
Expected labour force participation
Working life expectancy

23. ETK/Kannisto Jari 5.2.2015
Working life expectancy for a 15-year-old
2000–2014
Finnish Centre for Pensions 23
0
5
10
15
20
25
30
35
40
2000 2002 2004 2006 2008 2010 2012 2014
Years
Males Females

24. ETK/Kannisto Jari 5.2.2015
Length of working life
• The expected labour force participation in 2014 was
37.2 years
– an increase of 0,2 years from the previous year
– an increase of 2.1 years in the 2000s
• The working life expectancy in 2014 was 33.9 years
– as in 2013
– 33.9 years for males (decrease of 0.1 years compared to last
year)
– 33.8 years for females (as in 2013)
• The working life expectancy has increased by 2.4 years
in the 2000s
– males: an increase of 1.5 years
– females: an increase of 3.2 years
Finnish Centre for Pensions 24