Labour-market organisations in Finland have agreed the details of the country’s long-awaited pensions reform, which will raise the retirement age in fixed increments until 2025 and link it to longevity after that.

The central labour market organisations – the Central Organisation of Finnish Trade Unions (SAK), the Confederation of Finnish Industries (EK), the Local Government Employees (KT), the Finnish Confederation of Salaried Employees (STTK) – signed an agreement on Friday on the content of the pension reform that will change to the earnings-related pension scheme.

The Ministry of Social Affairs and Health will now start the process of amending legislation according to the proposal agreed by the social partners.

The aim of the pension reform, which will come into force at the beginning of 2017, is to extend working life and narrow the sustainability gap of the whole public economy by 1% of GDP, according to statutory organisation the Finnish Centre for Pensions, and Finnish pensions alliance TELA.

Under the agreed proposal for the pension reform, the earliest age workers will be eligible for an old-age pension will be raised gradually from 2017 by three months per birth-year cohort until it reaches 65.

The upper age limit for old-age pensions will be five years higher than the earliest retirement age.

However, under the agreement, the eligibility age for old-age retirement will be linked to life expectancy from 2027 to ensure the time spent working in relation to time in retirement remains at the 2025 level, according to the Finnish Centre for Pensions.

To keep to this ratio, the factors affecting the time spent working and the financial and social sustainability of the earnings-related scheme will be reviewed regularly, according to the agreed proposal.

This development will be monitored at regular intervals through tripartite negations (social partners and government) every five years, according to the deal.

TELA, which represents insurers providing earnings-related pensions, said the fact the agreement had been reached meant there would be no strikes or employer resistance to the reform.

But in the end, not all parties have been pleased with the agreement.

Reijo Vanne, director at TELA, said: “One problem is that the trade unions of people with academic education could not accept the agreement.”

The academics’ unions wanted to have higher pension accrual rates at higher ages, he said.

“Their argument was that people with long education do not have enough time to accrue a proper pension,” said Vanne.

The reform also provides for possible early retirement at 63 for those who are considered to have had a strenuous and extensive working life, according the Finnish Centre for Pensions.

The current part-time pension is to be abolished and replaced with a partial early old-age retirement, with certain new conditions.

Pension accrual rates will be standardised to make the annual rate for individuals of all ages 1.5% of wages, and working after the earliest pensionable age will be rewarded with a monthly increment of 0.4% for deferred retirement.

After 2017, pension contributions will accrue from the full wage, according to the reform, since the earnings-related pension contribution will no longer be deducted from the pensionable wage.

Between 2016 and 2019, the combined pension contribution for workers and employers is to be 24.4%, though in 2016 this will be temporarily reduced by 0.4%, according to the agreement.

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