Finland’s pension contributions set for historic drop after decades of rises

Finland’s pension contributions are poised to fall in the coming years following a long period of increases, with the Pensions Security Centre (ETK) calling the shift historic.

Currently, employees and employers pay a combined 24.9% of wages in pension contributions. By 2040, this is projected to drop to 22.6%, according to new long-term forecasts by the ETK, which cover the pension system up to 2100.

The primary driver is an upcoming reform allowing higher-risk pension investments, lifting the expected annual real return from 2.5% to 3.2%. The change is significant given the system’s current assets of €184 billion.

Older generations have received a multiple of their contributions in benefits compared to current and future workers, the ETK’s calculations show. A new calculator allows individuals to see their lifetime return based on birth year and gender, with women typically faring better due to longer life expectancy and higher widow’s pension uptake.

The shift from rising to falling contribution rates stems from delayed retirement ages, immigration of working-age people, and the investment reform. The ETK’s models assume an 85% employment rate among long-term immigrants.