Akava: Another pension reform ahead within the next ten years
The Board of Akava has decided not to approve the negotiated solution for the working career and pension reform. The pension reform was intended to focus, above all, on the extension of working careers and a sustainable and just pension solution. Now, with this solution, these aims will not be achieved.
“There is no reason to accuse Akava members of being greedy. The biggest losers as a result of this solution will be all those employees, regardless of occupational group, who manage to keep working until at least 65 years of age - but on weaker pension terms than is currently the case. The greatest relative benefit will be gained by those who retire from working life prematurely,” states President Sture Fjäder.
The Board of Akava further states that this reform proposal will not solve any of Finland's problems. The Board finds it inevitable that a comprehensive reform of the pension system will already need to be done within the next decade.
The highly educated, in particular, have already now voluntarily continued to work after reaching the lower pension age limit, which is currently 63 years.
“According to the current model, someone who works until age 65 receives a pension that is over 10 per cent higher than the pension payable at 65 in the future, because the earliest eligibility age for old-age pension will rise to 65 and both the increased accrual and the accelerated ‘super’ accrual will be gone. In this type of economic situation, attained benefits must be adjusted, but now they are being reduced to an exorbitant extent from precisely those who opt to extend their working career,” says Chief Economist Eugen Koev.
The pension reform will not contribute to the intended extension of working careers in other ways either.
“The new career pension to be paid on the basis of a strenuous and long career will provide a means of early retirement from working life, so in terms of the objective to extend working careers, it is a completely incomprehensible move. The solution should have included different types of working life flexibility, and it should have encouraged employers to support their employees' ability to cope at work,” adds Koev.
The level of earnings-related pension will be improved, to some extent, by the fact that the employee's share of the insurance contribution will no longer be reduced from the earnings on which the pension is based. The solution does not, however, work as an incentive for those near retirement age to continue working. The best way to attract employees to extend their career would have been to offer a reasonable economic accrual incentive at the end of their working careers.
“Akava's sense of justice can’t make peace with the idea that the current pensionable age classes have benefitted from the increased accrual rates during the past years, but today's youth will be stripped of that incentive completely. The removal of the increased accrual system will particularly impact on those studying in universities or universities of applied sciences, as well as the growing group of highly-educated individuals in atypical fixed-term employments,” says Fjäder.
Akava was, indeed, the only central organisation that stood up for the higher educated during the negotiations.
“It truly concerns me that not even the Confederation of Finnish Industries - EK seemed to consider educated wage earners as a particularly significant asset for Finland's working life. EK accepted a solution that looks to the past and doesn't encourage education,” stresses Fjäder.
The Board of Akava emphasised, in its meeting, that Akava no longer has any interest in establishing bipartite or tripartite labour market solutions that continuously reduce the purchasing power of the highly educated and minimize incentives to further educate oneself and make career advancements.
“Akava is seriously considering not being part of any possible continued term for the Pact for Employment and Growth,” states Fjäder.
The grounds by which the Board of Akava has decided to reject the negotiated solution are available online (in Finnish only):www.akava.fi/miksi_ei
Sture Fjäder, President, tel. +358 (0)400 609 717
Eugen Koev, Chief Economist, tel. +358 (0)40 867 0770