On average, our life expectancy is growing. This is why pensions have to be adjusted to the average extension of life expectancy. The life expectancy coefficient is a mechanism that affects the amount of retirement pension on the basis of the development of life expectancy.
If the average life expectancy increases, the life expectancy coefficient reduces the monthly amount of granted pension. However, you can compensate for this reducing effect by working longer. This accrues more pension.
Life expectancy coefficient calculated separately for each age group
Effect on retirement pension
The life expectancy coefficient is determined for each age group as they come to 62 years of age. When the retirement pension is granted, the accrued pension is multiplied with the life expectancy coefficient, resulting in the amount of granted pension.
For example, the life expectancy coefficient for those born in 1953 is 0.972. If the accrued pension is EUR 2,500 per month, the effect of the life expectancy coefficient is calculated as follows:
EUR 2,500 x 0.972 = EUR 2,420. Therefore, the pension will be EUR 2,420 per month.
For the age groups who have not yet turned 62, an estimate on the life expectancy coefficient has been made on the basis of the population forecast.
The pension calculator of the Loki service of the Seafarer's Pension Fund (link to login) takes into account the effect of the life expectancy coefficient. By continuing to work longer, you can increase the amount of your pension. You can inspect the monetary effects of continuing to work with the age options of the calculator.
If you retire before the age of 62, the coefficient verified for your first year of pension will be applied to your pension.
Effect on disability pension and survivors' pension
The life expectancy coefficient also affects disability pensions, but not as substantially. When a disability pension is granted, the life expectancy coefficient verified for the first year of pension will be used. Only the part of the pension accrued by the beginning of the retirement will be multiplied with the coefficient. Therefore, it will not be used to the so-called projected pension. When the disability pension is changed to retirement pension, the life expectancy coefficient will not be reapplied.
Survivors' pension is not multiplied with the life expectancy coefficient, but the survivors' pension is based on the disability pension the deceased received or would have received if they had become disabled to work on their date of death. The life expectancy coefficient is applied to this disability pension.
To whom does the life expectancy coefficient apply?
The life expectancy coefficient applies those born in 1948 or after. It affected pensions for the first time in 2010. It will not affect pensions that started before 2010.