Longevity adjustment of pension benefits

Arbeitspapier

In anticipation of future gains in life expectancy, several countries have passed laws that automatically adjust pensions, if life expectancy changes. In this paper we study the effects of longevity adjustment under demographic uncertainty in Finland. If longevity increases, the adjustment decreases the contribution rate, and the reduction is bigger the higher the rate would have been without the reform. On the other hand, longevity adjustment increases the uncertainty in replacement rates. The current middle-aged generations, whose pensions are reduced more than contributions, are likely to experience the largest losses. The full gains are observed far in future. The quantitative results depend on, besides demographic realisations, the specifics of the pension system. Longevity adjustment significantly weakens the defined-benefit nature of the Finnish pension system and brings in a strong defined-contribution flavour.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ETLA Discussion Papers ; No. 1073

Classification and Topics

• Classification: Wirtschaft ; Social Security and Public Pensions ; Demographic Trends, Macroeconomic Effects, and Forecasts
• Subject: pensions, longevity, demographic uncertainty ; Bevölkerungsentwicklung ; Sterblichkeit ; Alterssicherung ; Entscheidung bei Unsicherheit ; Finnland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lassila, Jukka
• Event: Veröffentlichung
• (who): The Research Institute of the Finnish Economy (ETLA)
• (where): Helsinki
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/63859
• Last update: 10.03.2025, 11:43 AM CET