Debt weakens the financial satisfaction of Finnish pensioners, new research by the Finnish Centre for Pensions (ETK) reveals.

Income level and health also have a strong impact on the financial satisfaction of old-age pensioners in Finland. The more debt an old-age pensioner has, the less satisfied they are with their financial situation relative to those who are debt-free.

“Debt and the amount of debt weaken the financial satisfaction of low-income pensioners more strongly than among mid- and high-income pensioners. Debt and the amount of debt are not as strongly linked to financial satisfaction among the latter,” ETK economist, Kati Ahonen, explained.

Having no debt seems to be linked to the satisfaction paradox; older pensioners have been observed to be more satisfied with their finances than younger pensioners, even though the former usually have a lower income than the latter, ETK found.

“Older pensioners are debt-free or have less debt than younger pensioners. This seems to be linked to the satisfaction paradox. Debt and the repayment of debt are likely to burden younger age groups more often than older ones,” Ahonen said.

On the other hand, wealth and the amount of wealth strengthens the financial satisfaction of pensioners to some extent. However, the observed impact of wealth on financial satisfaction was lower than expected. This may be because the different forms of wealth, such as savings or housing wealth, were not examined separately.

“A considerable part of old-age pensioners’ wealth consists of owned homes, which cannot easily be converted into cash. This is likely to be reflected in the degree of financial satisfaction,” Ahonen assessed.

Taking the differences in income and wealth into account, the financial satisfaction of pensioners is weaker in the capital region and Southern Finland than in Eastern and Northern Finland. This is probably because the housing and living costs in the capital region and elsewhere in Southern Finland are higher than in the rest of Finland.

The study is based on a survey on financial wellbeing conducted by the Finnish Centre for Pensions in 2020. It reviewed pensioners aged 64–88 years.

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