From employment to retirement – development of earnings and replacement ratios

Abstract

The study examined the changes in the level and composition of a person’s income during the process of retirement. Special attention was paid to the pension’s replacement ratio, i.e. to the ratio between the pension and the regular income prior to retirement. In addition to the replacement ratio, the change in gross income as a result of retirement was also analysed.

According to the results, the median of the replacement ratio of retired employees was approximately 60 per cent. Only on rare occasions was the replacement ratio below 50 per cent. The gross income levels before and after retirement were higher than these levels. Furthermore, when the level of income prior to retirement is taken into consideration, the replacement ratio according to pension act, type of pension, age, gender, and family status was of a similar level. However, those retired employees who had the lowest income formed an exception: their replacement ratio was higher than on average.

The study utilizes a unique panel data comprising 500,000 people from Statistics Finland’s population database in 1995–2004. The actual analysis was conducted on persons who retired from work between 1999 and 2003.

Publication Information

Rantala, J. & Suoniemi, I. (2010), Työstä eläkkeelle – tulokehitys ja korvaussuhteet, Finnish Centre for Pensions, Reports 2010:3.

• ISSN: 1795-2832
• ISBN: 978-951-691-126-0 (Print), 978-951-691-127-7 (Online)
• Press Release in Finnish
• Publication in PDF-format