What is the objective of the pension reform?
The pension reform, agreed on in January 2025, is intended to strengthen the sustainability of the earnings-related pension system. The reform secures the payment of pensions and reduces the pressure to increase pension contributions in the future.
How will the pension reform be implemented?
A key aspect is increasing the flexibility of regulation concerning the investment of pension assets, which enables the pursuit of better returns. Earnings-related pension insurance companies can invest a larger share of assets in investments with higher returns, such as equities.
The regulatory changes will be introduced in three stages so that earnings-related pension companies can raise their investments’ risk in a controlled and responsible manner.
Will the pension reform affect pensions immediately?
The pension reform will not affect current pensions and current pensions will not decrease.
The pension reform will also not change current pension benefits such as retirement ages or accruals.
The reform’s index limiter may impact the index increases of current pensions. The index limiter can be applied as of 2030.
How does the index limiter affect pensions?
The index limiter ensures that pensions develop in line with wage development. The index limiter is used in exceptional cases: Earnings-related pensions cannot increase over two consecutive years by more than the average rise in wages during the same period.
Will the funding of earnings-related pensions be increased?
Labour market organisations agreed on increasing the funding of old-age pensions in connection with the pension reform. Funding strengthens the system’s sustainability in a situation in which the population is aging and relatively fewer people are working.
How does the reform affect earnings-related pension contributions?
As part of the pension reform, the labour market organisations agreed on a 24.4 per cent contribution level for the private-sector earnings-related pension contribution (TyEL) for 2026–2030. The key goal of the reform is to curb increases in earnings-related pension contributions.
Will investing pension assets be riskier from now on?
Pension assets must be invested profitably and securely; the pension reform does not change this. Diversification into different asset classes will continue to be central to the management of investment risks. Increasing the share of equities in the portfolio is one way to target better returns, but it is not the only way.
Following the reform, seasonal variations in returns may be greater than in earlier years. In the long term, these variations will level off, and returns are expected to improve post-reform.
How does the pension reform impact young people and those starting their careers?
The reform is designed to support the position of younger generations. Additional funding and seeking better investment returns reduce the possibility of surprise changes having to be made to pension benefits in the future.
How has Varma prepared for the pension reform?
Varma is well-placed to implement the pension reform thanks to our particularly good solvency. Varma is the most solvent earnings-related pension company, which gives us flexibility when implementing the reform.
The change brought about by the reform is nothing new for earnings-related pension companies. The reform is a continuation of investment operations’ development over the past 20 years.
We have carefully prepared for the implementation of the reform along the way, as the legislation has moved forward.
How will the reform impact client bonuses?
Varma has paid its customers competitive client bonuses thanks to its strong solvency, investment returns and operational efficiency. In the future, our goal is for our customers to also continue benefitting from Varma’s solvency. The goal of the pension reform is to keep client bonuses at their current level, allowing any increase in investment returns to be used to strengthen the pension system.
How will regulation be eased in three stages?
Earnings-related pension companies’ solvency regulations and investment limits will be eased in stages on 1 July 2026, 1 January 2027 and 1 July 2027.
Increasing the flexibility of solvency limits means that earnings-related pension insurance companies require a smaller buffer than before in relation to risks and liabilities. The buffer is a computational value and it must cover current and future pensions.
It is important that the pension reform’s changes are carried out gradually, allowing the security of earnings-related pension assets to be maintained in all situations.