Restrict early retirement to make the pension reform a success

May 2006
OECD Economic Surveys: Finland;May2006, Vol. 2006 Issue 5, p63
Country Report
Country Report
A wide-ranging pension reform was introduced at the beginning of 2005. A central objective is to extend working lives by 2-3 years. However, success is likely to depend on further curtailment of early retirement pathways which will otherwise blunt the improved financial incentives to work longer in the reformed old-age pension system. The "unemployment pipeline" whereby the unemployed can effectively retire at age 57 should be abolished and activation measures for the older unemployed increased. There is also considerable scope to reduce the large share of the population on a disability pension, following experience of other OECD countries, particularly through better gate-keeping and greater emphasis on activation that involves early intervention combining both medical and vocational rehabilitation. Such an approach is also likely to improve the health and well-being of many of those directly concerned. Moreover, past experience suggests that early retirement pathways can amplify and perpetuate major adverse demand shocks, because the likelihood of returning to employment is low.


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