An Evaluation of the 2026 Earnings-Related Pension Reform

This study evaluates the reforms proposed by the Ministry of Social Affairs and Health for the earnings-related pension system in the 2025 legislative proposal. The proposed reform would allow private-sector pension institutions to take on greater investment risk. According to Etla’s assessment, the investment reform would increase expected returns and strengthen public finances, as intended. The proposal also includes increased prefunding of old-age pensions, which is justified from an intergenerational perspective. The proposed index limiter, however, is problematic: while it would remove incentives to retire early when real wages decline, it would simultaneously and permanently reduce the purchasing power of pensions across age cohorts in an arbitrary manner, regardless of whether such cuts are warranted. Overall, the legislative proposal leaves open what would occur if investment returns fall short of expectations or, conversely, exceed projections over an extended period. Adoption of the proposal would imply that further reforms are likely and that labour market organizations would retain control over this central component of social security and over Finland’s largest—and, following the reform, likely expanding—concentration of assets.