The Finnish Centre for Pensions has assessed the allocation of wage-earners’ earnings-related pension contributions and pension per generations and gender. The projection covers the birth cohorts 1940–2000.
The internal rate of return shows what the real rate of return is between received pension benefits and pension contributions for each age cohort.
Those who have already retired will receive the highest real rate of return. The internal rate of return will decline from 6.5 per cent for those born in 1940 to 2.3 per cent for those born in the 1970s. After that, the level will stabilize.
The gap in the rate of return is mainly due to the fact that the earnings-related pension contributions were much smaller in the past.
Nevertheless, all generations will receive more in pensions than they have paid in contributions. This is made possible because of the economic growth and the investment returns of pension funds. Because of the growing earnings level, the wages and pensions of the younger generations will be higher than those of the earlier generations.