Finland’s Flexible Partial Pension – A Bridge to Full-Time Retirement, a Pathway Out of Paid Employment, or an Income Supplement?

Flexible partial retirement schemes are intended to give individuals the opportunity to reduce working hours before moving into full retirement, the expectation being that the reduced workload will contribute to postponed old-age retirement. Yet, there is limited research about whether and how flexible partial pensions are used to exit the labor force, as an income supplement, or as a way of bridging the transition into retirement through part-time employment. During the study period, individuals in Finland could take part of their accrued old-age pension after reaching age 61 regardless of their employment status. Using high-quality register data with monthly information on retirement and wage income, this study uses sequence analysis to analyze how previously employed individuals adjust their employment after taking up a partial old-age pension. Only around one in five continued to work at a reduced wage income level, indicating a reduction in working hours. Around one in six left paid employment just before or after pension take-up. Most individuals did not reduce their working hours when taking up the pension, contrary to the policy goal of the partial old-age pension.