Pensions | A change in the life expectancy factor that cuts the pension, due to corona mortality

Employment pension for the first time, there has been a turn in the development of the life expectancy factor affecting the number. The fixed life expectancy factor for 2024 reduces pensions by 0.3 percentage points less than the previous year.

For 15 years since it was set, the life expectancy factor has only had a downward effect on the amount of the monthly pension. The effect of the life expectancy factor has been predicted to increase year by year.

Head of the Pension Security Center's unit Heikki Tikanmäki says the change is mainly due to the high mortality rate related to corona in 2022.

“Especially the mortality of old people was much higher than in previous years. That's what this big picture is all about,” says Tikanmäki.

Statistics Finland by in 2022, 4,349 people died of the coronavirus disease in Finland, or about seven percent of the deaths. In the same year, a total of 63,200 people died in Finland, which is more than 5,500 more than in 2021.

of the Pension Security Center according to the life expectancy factor reduces the monthly pension if life expectancy increases. Corona mortality has had a downward effect on life expectancy as a whole, which is also reflected in the life expectancy coefficient.

“The life expectancy factor is specific to the year of birth, and its effect is the same as long as the pension is paid. Life expectancy coefficients are always calculated based on five-year mortality figures, and this effect of 2022 will then be seen in five age groups,” says Tikanmäki.

Apart from the impact of the 2022 mortality figures, Tikanmäki does not expect any particular change in the life expectancy coefficient, and he expects the 2025 coefficient to remain at the same level as in 2024.

The changes set by the life expectancy coefficient in the coming years will not be reflected in huge increases in euros in pensions. According to Tikanmäki, in an average-sized pension, we are talking about a change of around six euros per month.

Pension Security Center calculates the value of the life expectancy factor annually, and the life expectancy factor is set year by year for those turning 62 in that year. The life expectancy coefficient of 2024 therefore corresponds to those born in 1962.

The life expectancy factor works in such a way that the pension is multiplied by the life expectancy factor when the pension starts. The multiplier permanently affects the amount of the pension, and the multiplier does not change. The coefficient was calculated for the first time in 2009, and in practice it affected pensions for the first time in 2010, when those born in 1948 turned 62.

According to the Swedish Pensions Agency, the purpose of the life expectancy coefficient is to limit the increase in pension costs due to the increase in life expectancy and to postpone the transition to retirement. The Pension Security Center has estimated in 2022 that the current Pension Payment level will not be sufficient to pay pensions in the future. According to their estimate, the current Pension Payment level will only last for about twenty years.