Finland is known for the benefits it gives parents to take care of their children at early age. However, family vacations, especially if they are long, have a price for the beneficiaries: this can be noticed immediately, because the beneficiaries are temporarily removed from their careers, or later when calculating the retirement pension.
The Finnish social security authorities have published a new calculator for people planning to use family leave periods who want to asses in advance how this benefit would affect their future pension. This tool allows users to compare the accumulation of pensions during family leave with what they would earn as a pension if they worked in the same period.
The calculator, provided by the Finnish Centre for Pensions, is part of a project which aims to promote gender equality in pensions. It is available in Finnish, Swedish and English. at the website Työeläke.fi.
According to the Finnish Ministry of Social Affairs and Health, parents taking family leave will earn pension benefits for the period they receive maternity, paternity or parental allowance or child home care allowance. Now, with the calculator, they can determine the best way to divide family leave periods between them depending on the effects on their pension.
“Parents earn pension benefits during their maternity, paternity or parental leave almost the same way as when they are working, but long periods of child home care allowance will have a negative pension impact,” says Senior Advisor Suvi Ritola, from the Finnish Centre for Pensions.
Parents will earn earnings-related pension during their maternity, paternity or parental leave based on their income so that the annual income that was used to calculate their allowance amount is raised by 21%. Parents receiving child home care allowance have earned state-funded pension benefits since 2005. Their pension will accrue based on a fixed amount, which is 757.14 euros per month at 2020 level.
Gender pension gap
The project promoting gender equality in pensions aims to generate discussion on the gender pension gap. Another aim is to increase peoples’ and decision-makers’ awareness of the underlying reasons. While the uneven distribution of family leaves creates differences in pensions, there are also other factors behind the gender pension gap, the Finnish Government says.
The project is led by the Ministry of Social Affairs and Health in cooperation with the Finnish Centre for Pensions, the Social Insurance Institution of Finland (Kela) and the Finnish Pension Alliance TELA. The Ministry of Social Affairs and Health says that is now preparing a family leave reform.