Inflation is raging and, thanks to the folded index, there will be a significant increase in occupational pensions again. What does Kimmo Kiljunen, the well-known opponent of the folded index, think about this?
For years MP of the time Kimmo Kiljunen (sd) has become known as a major opponent of the modern occupational pension index, i.e. the so-called folded index.
Kiljunen himself says that he is constantly asked about it.
“When I walk down the street, I might be told that there will be Mr. Folded Index. I accept it with pride.”
The folded index means that when calculating increases in occupational pensions, they are affected by an increase in prices by 80 percent and an increase in wages by 20 percent.
In 2015, Kiljunen was one of those who, with the help of a citizens’ initiative, demanded that the occupational pension index be returned to a salary level index. In the salary level index, i.e. the earnings level index, occupational pensions are tied 100% to the development of salaries.
Screaming has opposed the folded index because, according to him, it has been unfair to pensioners. According to Kiljunen, pensions should rise in line with wages and not prices.
For years it was the case that the pensions received by pensioners did not keep pace with the increase in the real earnings of wage earners.
However, rapid inflation changed the situation. This year, the folded index has done more good than bad for pensioners. The occupational pension index was increased by 6.8 percent at the beginning of this year, while the increase brought by the salary coefficient to the earnings that form the basis of the pension remained at 3.8 percent. The increase made for this year was the largest in more than 30 years.
Last week HS reports, that there will be more good news for pensioners next year, as occupational pensions will rise rapidly again. A 5.7 percent increase in the occupational pension index is promised at the turn of the year. The salary coefficient affecting the starting pensions of persons who are retiring is 5.1 percent.
This means that if you want to get a 5.7 percent increase in your pension next year, you have to retire this year. If you retire next year, the pension will be increased next year by 5.1 percent.
According to Statistics Finland, the earnings level index, which describes the development of wage earners’ nominal earnings, rose by 4.9 percent in July–September of this year compared to the previous year.
What here comes Kimmo Kiljunen, have you changed your mind about the folded index?
“In no case have I changed my position. You can’t talk about the pension system and pensions on an annual or quarterly basis, you have to look further.”
According to Kiljunen, nothing has changed in the long term. He still believes that we should get rid of the folded index if we want to ensure the development of the income level of pensioners.
“If we tie the index to consumer prices, it means that pensioners will structurally lag behind wage development, as has been the case for twenty, thirty years when the folded index has been in effect.”
Kiljusen According to In the mid-term index, both the price and the change in earnings account for 50 percent. In Kiljunen’s opinion, it would be good if two-thirds of the annual increase provision could be paid to everyone in the same amount in euros and one-third as a percentage increase.
“The folded index was created so that we can increase the pension fund volume, and this has also happened.”
Kiljunen thinks that too much. In 1995, the pension funds had 36 billion euros. At the end of June, there were pension funds According to the occupational pension insurers (Tela). 243 billion euros. The share of private sector investment assets was 154 billion euros, and the share of public sector investment assets was 89 billion euros.
“According to Tela’s statistics, 60 percent of the money collected there is the funds of current pensioners. Now they are pawned and pawned, and pensioners are not treated in a legitimate way.”
Tela’s website states that the funds in the funds have been sized based on precise calculations to be sufficient for the pensions of different age groups, and there is no intention to empty them at any point.
If the money saved by the working-age generations for their pensions were used ahead of time, i.e. for the benefit of the older generations, there would no longer be enough money for their own pensions.
According to Tela, at the end of 2018, about a third of the pension assets of the private sector were reserved for those of old-age pension age, i.e. those over 65.
Kiljusen think that the pension security system, which is based on funding, is good, but it has gone too far. Kiljunen reminds that Finland’s statutory pension fund system is unique in the world. In the majority of European Union member countries, the funds do not even have euros.
“For example, the OECD does not consider the Finnish national economy to be in net debt at all, because 250 billion have been pledged in funds abroad and these pension funds are counted as part of the public finances.”
According to Kiljunen, it is unbelievable that the matter is not talked about more.
“Why is it not talked about, because it is investor power. Currently, the Finnish capital market is structured in such a way that occupational pension companies are the key players.”
Although Kiljunen is currently known as an opponent of the folded index, he actually voted for it in 1995. The reason was that when inflation ran rampant, purchasing power might collapse. He became an opponent of the folded index when Jyrki Katainen (cook) and Jutta Urpilainen’s story (sd) during the government, it was decided to freeze the index increase of occupational pensions. The index should have increased by 1.1 percent in 2015, but it only increased by 0.4 percent, equal to the increase in contract wages.
“It’s an incredible pattern that the worst index format was applied for the pensioner.”
Kiljunen plans to become a supporter of the folded index only in one case: If it were to happen that the current situation becomes permanent, and the real wages of wage earners start to fall permanently.
“It is now accepted that the increase in wages no longer compensates for the weakening of the value of money and follows economic growth, i.e. real increases would no longer be made. If this were to be done, even purchasing power weakened by inflation would have to be ensured in pension security.”
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