Finland’s Economic Policy Council has identified four specific pension benefits costing billions that should be cut immediately to slow the growth of public debt, directly challenging the government’s recent reform. In its annual report, the independent five-member expert panel argues that while the government made significant cuts to social benefits for working-age people, it left the much larger pension system largely untouched, a move the council calls difficult to justify.
A Council At Odds With Government Strategy
The Economic Policy Council, chaired by University of Helsinki macroeconomics professor Niku Määttänen, acts as an independent watchdog for state fiscal policy. Its latest report assesses the government's 2025 pension reform, which it characterises as an 'investment reform' for its focus on boosting pension fund returns. While the council sees merit in some aspects, like fixing the private-sector earnings-related pension contribution at 24.4%, it criticises the government's reluctance to cut certain pensions that would have a more immediate impact on debt. 'Against this background, it is difficult to justify why pensions, which form a very large part of all public transfers, were largely left out of the cuts in the reform,' the report states. The panel notes the government has decided on numerous social security cuts primarily affecting transfers to working-age individuals, making the protection of pension benefits stand out.
The Four Benefits In The Crosshairs
The council’s review focuses on benefits not clearly targeted at low-income earners but which nonetheless require stricter taxation to fund. It proposes concrete cuts to generate savings. The most contentious is the pension accrued from educational degrees, which costs about 600 million euros annually. Chairman Määttänen, in an interview, called this 'the craziest' of all, as these pensions benefit higher-income individuals more, since a higher education degree accrues more pension than a vocational qualification and the lifetime income of the highly educated is greater on average. The second target is the pension accrued from earnings-related unemployment periods, a roughly 700 million euro annual expense. The council suggests removing this pension accrual would be a better alternative for the unemployed than the government's implemented cuts to unemployment allowances.
Rethinking Support For Life's Transitions
The third benefit flagged for reduction is the widow's pension, which primarily benefits surviving spouses who are themselves pensioners and often have their own income. The council implies this support is not efficiently targeted at those in genuine financial need following a loss. Finally, the panel questions the pension accrual during parental allowance periods. The council's broader argument is that support should be directed to people when they actually need it, not decades later. 'Both students and the unemployed should also be supported financially during their studies or unemployment, when they have hardly any other income, and not possibly only decades later in retirement,' the report proposes. This represents a fundamental shift in thinking about the purpose of social security, from a life-long savings model to a more immediate safety net.
The Political Calculus Of Pension Cuts
The council's recommendations land in a politically sensitive area. Pensions are considered a political third rail in Finland, with a powerful voter base and strong defensive unions. The government's reform, focused on investment returns and future sustainability, avoided direct cuts to current or near-future pension accruals, likely for this reason. The expert panel's report highlights this tension between long-term structural reform and short-term fiscal necessity. By pointing out that over 700 million euros could be saved annually just from the unemployment pension accrual, the council frames its proposals as clear, actionable alternatives to cuts affecting working-age people's immediate incomes. The debate now centres on whether the government will consider these specific, targeted cuts or maintain its course that shields pension accruals from the austerity applied elsewhere in the welfare system.
A Broader EU Context For Finnish Debt
While the council's report is domestically focused, its urgent tone on public debt resonates with broader EU-level fiscal surveillance. Finland's debt-to-GDP ratio has grown significantly, and the European Commission monitors member states' compliance with fiscal rules. The council’s argument for immediate, structural savings in major expenditure items like pensions is a direct response to this sustained fiscal pressure. It underscores a choice between different models of adjustment: cutting benefits for the active population or reforming universal entitlements that benefit all income groups. The government's current path, as criticised by its own appointed watchdog, may not be sufficient to alter the debt trajectory quickly, potentially leading to tougher decisions down the line.
The ball is now in the government's court. The Sanna Marin government previously established the Economic Policy Council for exactly this kind of independent, expert analysis. Ignoring its stark recommendations on such a high-cost item carries its own political and financial risks. As the Eduskunta prepares for further budget debates, the council’s surprising list of four pension types provides a clear, if politically dangerous, roadmap for more aggressive fiscal consolidation. The question for ministers is whether they have the political capital to follow it.