The life expectancy coefficient is applied when the pension starts, that is, when your pension amount is calculated. The coefficient reduces your monthly pension based on how average life expectancy increases. People are living longer, and this means we have greater life expectancy. Greater life expectancy has to be accounted for when calculating pensions.
The life expectancy coefficient is determined for each age group at age 62. It will be permanently applied to the pension payments you get. The Ministry of Social Affairs and Health issues a decree on the value of the life expectancy coefficient for the next year by the end of November at the latest.
Example of how the life expectancy coefficient affects your pension amount
You were born in 1960. By the time your old-age pension begins, you have accrued a monthly earnings-related pension of 1,600 euros. The confirmed life expectancy coefficient for those born in 1960 is 0.94659. The pension you have accrued is multiplied by the life expectancy coefficient.
€1,600 × 0.94659 = €1,514.54
Your gross pension is €1,514.54. This means that the life expectancy coefficient reduces your pension by around 5.3 per cent.
Pension on pension record adjusted with life expectancy coefficient
The pension amount stated on your pension record has been adjusted with the life expectancy coefficient. The Finnish Centre for Pensions projects the coefficients based on Statistics Finland’s population forecasts.
Five years before you reach your retirement age, your pension record will include an estimate of your target retirement age. The target retirement age indicates how long you need to defer retirement in order for the increment for late retirement to increase your pension as much as the life expectancy coefficient cuts it at the retirement age of your age group. The estimate of your target retirement age is specified in the year in which you (as an employee or a self-employed person) turn 62.
Life expectancy coefficient and disability pensions
The life expectancy coefficient is also applied to disability pensions. The coefficient used is the life expectancy coefficient confirmed for the 62-year-olds in the year in which your pension starts, that is, the year in which your disability begins. Typically, the life expectancy coefficient applied to your disability pension reduces your pension less than would the coefficient determined for your own age group.
The life expectancy coefficient is applied to the pension you have earned up to the time of retirement but not to the projected pension component that is computed for the time from your retirement on a disability pension to when you reach your retirement age. If you retire on a disability pension in 2027 or later, your total disability pension, including the projected pension component, will be multiplied by the life expectancy coefficient. At that point, the retirement age will be linked to life expectancy and the life expectancy coefficient will be determined in a more lenient way.
The life expectancy coefficient is applied only once. When your disability pension becomes an old-age pension, the coefficient is not applied again.