Social partners agree pension and unemployment insurance reforms

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In November 2001, the Finnish social partners, pension institutions and government agreed a set of pension and unemployment insurance reforms. On pensions, it remains unclear whether entitlement will in future be calculated on the basis of a person's last 10 years of employment or their whole career. Unemployment benefits will be increased or cut depending on the age and work history of the employee.

Tripartite working groups - involving representatives of the social partners, pension institutions and government - which have been considering the reform of state pensions and unemployment insurance (FI0109101F) reached an agreement on 12 November 2001. Some details remain to be finalised, with the method of calculating future pension entitlements to be decided by the end of 2008 - the choice is between using employees' last 10 years at work or their whole working history as the basis. The benefits of people who have already retired will remain intact, as will that part of current employees' future pension entitlement earned before the pension reform takes effect in 2005. Unemployment benefits will be improved or cut from the beginning of 2003, depending on the age and work history of the individual employee.

On pensions, the main points of the agreement are as follows:

• until the end of 2004, pension entitlements will be calculated in the current way, that is, based on the last 10 years of employment. Pension rights acquired until the end of 2004 remain intact;

• attempts will be made to negotiate a single method of calculating pensions before 2005;

• if no agreement can be reached on this point, pensions will be calculated from the beginning of 2005 until the end of 2010 in two ways - either according to the present model or based on the whole working life of the employee. The pension institutions will select the better option for each retiree;

• by the end of 2008, a single model for calculating pension entitlements must be agreed upon. This final calculation model will take effect at the beginning of 2011;

• the final calculation method chosen must guarantee that changing their employment must not decrease an employee's pension, and that people with different working life backgrounds must be treated as fairly as possible; and

• from 2005 it will be possible for people to choose when to retire between the ages of 62 and 68.

On unemployment insurance, the main points of the agreement are as follows:

• unemployed people will be able to receive the income-related daily unemployment allowance for up to 500 days;

• the daily unemployment allowance for people who have been dismissed for economic reasons or reasons related to production. and who have been in the same employment for at least 20 years, will be increased by an average of FIM 30 during the first 130 days of unemployment;

• unemployment pensions (allowing early retirement for long-term unemployed people - FI0104183N) will no longer be available to people born in 1950 or later. If people become unemployed at the age of 57, they will be entitled to the income-related daily unemployment allowance until the age of 65, if they have worked for five years during the previous 15. Those born before 1950 will be entitled to a daily unemployment allowance from the age of 55 until the age of 60. Thereafter, early retirement and then full retirement will become possible;

• the period of employment required for entitlement to income-related daily unemployment allowance will remain at 10 months for people who become unemployed for the first time. However, for subsequent periods of unemployment, the period of employment required to reacquire rights to the allowance will be reduced from 10 to 8 months. The period during which the necessary employment to receive the income-related daily allowance can be built up will be extended from 24 to 28 months; and

• the conditions for payment of 'mediated' daily unemployment allowance (which depends on a recipient's other incomes) will change so that a recipient can engage in full-time work extending over two weeks without cutting the daily allowance. At present, the limit is four weeks.

The unemployment insurance changes will take effect mainly in 2003.