The pension systems have been reformed extensively over the years. Smaller adjustments are made each year. The first extensive social insurance that covered the entire population was the national pension system that came into force in 1939. An earnings-related pension act that covered all workers took effect in 1962.

The structure of the national pension system and its relation to earnings-related pensions has changed over the years. The biggest turning point in the earnings-related pension system after its creation in 1962 was the reform in 2005, which unified the whole system considerably. The latest reform took effect in 2017. These reforms have also affected national pensions.

The Finnish pension system is developed in tripartite negotiations between the State and the central labour market organisations. Parliament passes the pension laws.

These pages include information on some of the most significant reforms of the structure, scope and coverage of the Finnish pension system. We have also included links to information underlying more recent and larger reforms. Smaller adjustments made to the system each year are also presented on this site.

The first extensive social insurance that covered the entire population was the national pension system that came into force in 1939. Originally, the national pension was supposed to be earnings-related and both employers and workers paid a contribution of 2 per cent of the wages to funded individual accounts. These national pension savings did not make a significant impact since they matured well into the end of the 20th century.

In addition, the strong inflation caused by World War II ate into the funds. The assets did affect the modernisation of the Finnish society through long-term investments, particularly the electrifying of society. In terms of the funds’ initial purpose – pension provision – the original national pension did not have time to make a significant impact.

Although the Finnish demography was exceptionally young due to the high birth rates after World War II, the number of old people also grew. In a rapidly urbanising world, the younger generation was no longer able to take care of the older generation. Finland was the last agrarian country in the West as more than half of the population lived in rural areas well into the 1950s.

The development of the national pension scheme was disputed for years but, surprisingly, funding was abandoned as of the beginning of 1957. As a result, the national pension became a flat-rate pension scheme. Everyone was paid a certain minimum pension and an income-related supplement.

When the national pension became a flat-rate pension, the income of particularly women in the countryside improved. At the same time, the urban population became increasingly dissatisfied because living expenses rose and some of the wages were reduced. The situation led to protests throughout Finnish society because, among other things, pensions were felt to be unfair.

The national pension was the basis of pension provision for Finnish citizens until 1975, when the rules changed. Even today, the national pension is reduced if a person also receives an earnings-related pension. Between 1962 and 1975, the insured accrued earnings-related pension on top of their national pension. However, this quickly led to severe problems in the integration of pensions and the financing of national pensions. Only in the 1970s did the average level of earnings-related pensions surpass that of national pensions.

A couple of other structural changes have been made to national pensions since 1975. Various different parts of the national pension were reduced and the structure was simplified in the early 1980s. At that time, the national pension, along with other social benefits, became taxable income.

In 1996, the basic amount of the national pension that was paid to all citizens was abolished. Since then, the national pension has been payable only to such pension recipients who receive no or only a small earnings-related pension. The most recent structural change to the minimum pension was made in 2011 when the guarantee pension was introduced.

The 2017 pension reform also affected pensions managed by Kela. The retirement age of the old-age pension under the national pension system will be linked to the retirement age of the earnings-related pension system for those born in 1965 and later. That retirement age is linked to changes in life expectancy.

Before the 1960s, pension that accrued from work was a privilege for the few.  In practice, a few large employers and some fields had arranged their own company pension funds or industry-wide pension funds for their workers. State and local government employees had different pension arrangements (more than 1,000 different pension rules for municipal and city employees). Before earnings-related pensions became statutory, workers usually lost their right to these special pensions if they changed employer.

The current earnings-relate pension provision was created mainly in the 1960s, although the first statutory pension act, for sailors, came into force already in 1956. The first general pension act, the Employees’ Pensions Act (TEL) and the Act for Persons in Short-term Employment Relationships (LEL) came into force on 1 July 1962. In the same decade, pensions for public sector workers were standardized and reformed, as well.

In the private sector, most of the aforementioned pension providers who existed before the introduction of statutory pensions were integrated into the statutory pension system. As a rule, they arranged supplementary pension provision that was often partly financed by the workers. Supplementary pensions were favoured because they were used to complement the initially low earnings-related pensions. These types of pensions have been terminated gradually. It is still possible to complement statutory pensions with voluntary pensions, but they are no longer linked.

Pension accrual rates were gradually improved. The largest change occurred in 1975, when the earnings-related pension became the primary pension in relation to the national pension. In addition, the pension accrual rate improved, partly in retrospect, from 1 per cent of the annual gross earnings to 1.5 per cent. This accrual rate is still in use.

Since the self-employed lacked pension provision, the Self-employed Persons Pensions Act and the Farmers’ Pensions Act came into force in 1970. As a result, more than half a million persons started to accrue a pension based on their self-employment. The Pensions Act for Performing Artists and Certain Groups of Employees (TaEL) was in force from 1986 to 2006.

The Employees Pensions Act (TEL), the Temporary Employees’ Pensions Act (LEL) and the Pensions Act for Performing Artists and Certain Groups of Employees (TaEL) merged into the Employees Pensions’ Act (TyEL) as of the beginning of 2007. Grant recipients have been covered by MYEL since 2009. The Public Sector Pensions Act (JuEL) combined the pension provision of State, local government, Church and Kela employees under one and the same act in 2017.

To begin with, the earnings-related pension acts provided security only in old-age and in case of disability. Fairly quickly, earnings-related pension provision was supplemented with survivors’ pensions and unemployment pensions. In the 1970s, the demand for vocational retirement ages was fierce. This would have led to an unsustainable situation as the number of pension recipients exceeded more than one million already in 1980 (currently, pension recipients number 1.5 million people). Retirement was made more flexible through individually assessed pension benefits, which are no longer in use. As society has changed, pensions, terms and conditions, benefits and financing of pensions have been amended. The key amendments are listed on this site.

Coverage has been expanded also through minor changes to the acts. For example, the duration of the employment relationship and the earnings level required for pension accrual have been lowered. The ages at which the insurance obligation and pension accrual begin and end have also been amended. This has extended the working life period for which pension accrues. Since the changes made in the mid-1990s, the period based on which the pension amount is determined has been extended: from a 10-year average earnings period that was introduced in 1996 to the average earnings throughout one’s working life that was introduced in the 2005 pension reform.

The 2017 pension reform continued in the path of the 2005 pension reform. The largest principled change was linking the retirement age to changes in life expectancy.

Finnish Centre for Pensions – Central body of and expert on statutory earnings-related pensions