Retirement age and human behaviour

2024-06-25 at 11:06 Timo Löyttyniemi

There is a consensus that it is desirable for people to keep working for longer. Work, at its best, has the power to bring us joy, raise revenue for the government and leave the pension system on a more sustainable footing. When people are able to work longer, everyone wins. However, when it comes to working longer, not all jobs are made equal. Physically demanding roles may well require a lower retirement age, and there are jobs where the joy is outweighed by a different set of feelings entirely. What’s important to note is that many of us already continue to work in our retirement. According to recent data from the Finnish Centre for Pensions (ETK), around a third of all Finnish pension recipients work at least part time.

Living longer

As part of the 2017 pension reforms in Finland, it was decided that some of the projected increases in life expectancy would be channelled towards longer working careers. It was agreed that the pension age should rise. In terms of the pension system, later retirement makes sense if the pension system parameters are set up in such a way as to benefit the system. Driving this change is the motivation to create a virtuous circle that will ensure the long-term viability of the pension system as life expectancy rises and allow us to deliver on the pension commitments made.


Where pensions are concerned, all of us have options. In Finland, we talk about “earliest retirement age”, “target retirement age” and “maximum insurance obligation age”. Alongside these, paths to early retirement are also available. This allows individuals to make their own decisions about retirement in the defined benefit pension system. Lots of high-quality information is available to support the decision-making process. You can request a “pension record” from your pension provider which is a statement showing useful information like how much you have accrued to date in pension contributions. You can also calculate pension projections by varying your earnings and the number of years worked.

The power of a system

A personal pension statement is a hugely important document. You could almost think of it like a bank account statement. Whether you have a lot or a little in your account, you will definitely want to know what the balance is. The same is true of your pension too. Some pension records are still designed to promote the lowest possible retirement age. However, if you’re interested in remaining in employment for longer, your pension record will also give you information about how the additional years worked will translate into a larger pension.

It might be an idea to present the information the opposite way around. The pension record could be set up to show your target retirement age first and then offer you a calculation of the euros lost if you decide to retire earlier. The loss is not inconsiderable and, depending on the size of your pension pot, can amount to several percent. Over many years, that percentage will come to have a significant impact on your monthly retirement income.

Perhaps we should turn to psychology to determine the right approach. Is it better to focus on the additional pension income accrued over a longer working life or to highlight the euros lost through reduced years? In terms of the well-balanced pension system itself, a longer career would most probably be preferred. People who love their jobs might well be keen to continue working. The state, as the tax recipient, appreciates longer working careers and the lower basic pension payments from Social Insurance Institution and reduced health spending that follows. Retirement age is not a technical detail related to pension system design but rather a personal choice.

Compared with other countries, there is scope for raising the Finnish retirement age. As things stand at present, Finland sits somewhere in the middle internationally. I doubt working slightly longer before retirement would send us crashing from our top spot as the happiest nation in the world. Denmark and Iceland currently lead the way for the highest pensionable age, with people retiring at around 67. What my friends in these countries tell me is that, because of peer pressure, it’s now actually difficult to retire any earlier. As they say, when in Rome do as the Romans do!

What about young people?

According to ETK statistics, the earliest retirement age for an 18-year-old person in Finland is 69 years and 1 month. There is no target retirement age for under 18-year-olds yet. But if we were to do a simple calculation to compare target retirement age with earliest retirement age, we would arrive at a retirement age of 71 years and 5 months. For young people this means a distant 2077, a time point which might not be foremost in their minds right now.


Communications and psychology have a huge impact on our behaviour. Given that we have created the concept of “target retirement age”, it stands to reason that this is the target everyone should aim for. It surely makes sense for the target retirement age to be shown to us first. Ultimately, everyone will decide for themselves how many years they will continue to work for, but a collective system coupled with a little bit of peer pressure might just help us make informed and sensible choices.

Writer is VER's CEO Timo Löyttyniemi

TLö blogi 2020

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