Will I get by on my pension?

Maybe by lowering your standard of living.

Where do I get my earnings-related pension record?

In Finland, the earnings-related pension record (työeläkeote) is currently mailed on paper every three years. You probably don’t know which pension company is yours, but it is easy to find out. The easiest way forward is to log in to the online service through the Finnish Centre for Pensions website, which takes you to the Työeläke site.

In my case, after logging in, the service simply redirected me to the right pension company’s site, where I had to log in again with my online banking credentials.

In my case, the Elo pension company’s site had both a pension estimate and a pension record.

Pension record

The pension record mainly shows your annual wages for each year of your working life. It is of course worth checking that the amounts are correct. Otherwise it is not very interesting. The pension estimate, on the other hand, is much more interesting.

Pension estimate

Through the pension estimate service I got a calculation showing my lowest retirement age and the monthly pension I would get at that age.

With my details, the pension at the lowest possible retirement age would be about 58% of my current income.

Let’s take an example. A 23-year-old (born in 1994) who has not yet accrued any pension would, with a monthly income of 3,000 euros, get a pension of 1,756 euros according to the pension calculator. That is about 58% of income, and the lowest possible retirement age is 67 years and 9 months.

Inflation

Does that sound like an amount you could live on today? And what about after all the years that are still left before retirement? Inflation keeps eating away at the purchasing power of that amount. Or does it? Pensions get index adjustments every year. “In the earnings-related pension index, the change in prices has a weight of 80 percent and the change in wage earners’ earnings a weight of 20 percent.”

Inflation (measured by the consumer price index in Finland) has been about 1.6% over the last 20 years, or 4.3% on average since 1975.

In practice, the earnings-related pension index has developed slightly better than the consumer price index, so let’s leave inflation out when we assess whether the pension is enough.

What about taxes?

How much tax would you pay on that monthly pension?

According to calculations by the Finnish Taxpayers’ Association, in 2017 the tax rate was, for example, 22% for a monthly pension of 2,000 euros and 28.5% for a pension of 3,000 euros.

How much of the pension is left after tax

The example pensions in the table were calculated with the pension calculator, using the 23-year-old from the earlier example.