Work Resumption after a Fixed-Term Disability Pension: Changes over Time during a Period of Decreasing Incidence of Disability Retirement

Abstract

The incidence of disability retirement in Finland has sharply decreased over the last ten years. At the same time, the share of fixed-term pensions has increased to cover more than half of all new disability pensions. This study examined the efficiency of fixed-term disability pensions under these changing circumstances with the aim of addressing the following research questions: are fixed-term disability pensions more often converted to permanent pensions, and how have the changes affected return to work? The study was based on register data of Finnish residents aged 25–62 whose fixed-term disability pension started in 2006 (n = 10,177) or 2015 (n = 7918). Of the fixed-term disability pensions starting in 2006, 58 percent were converted to a permanent disability pension within the next four years. In 2015, the corresponding figure was 41 percent. Return to work increased from 24 to 30 percent. In addition, ending up in some other state (most often unemployment) increased, and, more often, fixed-term disability pensions continued for more than four years. Transferring to a permanent disability pension decreased more among the younger, those with a lower education, and those suffering from mental disorders. The results were not notably affected by changes in the characteristics of fixed-term disability pension recipients (e.g., demographic and occupational characteristics and rehabilitation) or the selection of applicants into a fixed-term or a permanent pension. Return to work increased more among men, the older age groups, those with a fixed-term disability pension due to somatic diseases, and those who had received vocational rehabilitation. Adjusting for the composition of fixed-term disability pensioners increased the differences between the study years, and controlling for the selection into a fixed-term pension further widened the differences. In conclusion, a decreasing proportion of fixed-term disability pensions are converted to permanent pensions, but this is only partly reflected in increased return to work. Further efforts are needed to support work resumption after a fixed-term disability pension to avoid the situation where people drop out from disability pension but are resting on unemployment and other benefits.