TEL-LEL pension system 1962
Employees’ Pensions Act (TEL)
The Employees’ Pensions Act (TEL; 1961/395) came into force on 1 July 1962. The Act was based on a white paper of the TEL committee (White paper No 11/1960). Based on the white paper, a total of six bills for the employees’ pensions act were brought before Government. Työväenasiainvaliokunta (committee for working population) rejected similar bills apart from MP Kokkola et al.’s bill (150/1961), on which TEL is based.
The Act covered 18-year-old private-sector workers (excluding those in LEL industries, see below) who could be seen as receiving their sufficient earnings as their main income from that employment relationship. There was no definite limit in markka in the original TEL that would ensure coverage by the act. The requirement of receiving the main income from the employment relationship left some of the side-line and part-time employment relationships outside the scope of the act. The employment relationship had to last for at least six months to entitle to the pension.
The benefits offered by the system were the disability and old-age pensions.
Pension accrued for all work under an employment contract that was done after the worker turned 23. Pension also accrued for 50 per cent of the time of the employment relationship that was valid at the time of TEL coming into force on 8 July 1961 that the worker had done after turning 23.
When determining the disability pension, it included a projected component from the time the employment relationship ended to the time of reaching the retirement age if no more than one year had passed between the pension contingency and the time that the employment relationship ended.
Pension accrued for the employment relationship and the projected pension period at a rate of one (1) per cent of the pensionable wage per year of service, but no more than 40 per cent of the pensionable wage. If the worker had several employment relationships that entitled to a pension, the pension was a maximum of 40 per cent of the highest pensionable wage during the worker’s working life.
The total pension that a person received consisted of earnings-related and national pensions, and possible pensions based on the Motor Liability Insurance Act, the Workers’ Compensation Insurance Act and the Military Injuries Act. The total pension was limited to 60 per cent of the worker’s highest pensionable wage. If the total pension exceeded the limit, the earnings-related pension was reduced. Any supplementary pensions that the person was receiving were not considered in this coordination.
The pensionable wage was determined separately for each employment based on the average monthly regular earnings received in the year of retirement and the previous year. The earnings were adjusted to the level of the beginning of the retirement year using the TEL index, which followed only the earnings-level index.
Temporary Employees’ Pensions Act (LEL)
The Temporary Employees’ Pensions Act (LEL; 1962/134) came into effect on 1 July 1962, at the same time as TEL. Under this act, private-sector workers with employment relationships in the forest, agriculture, construction or harbour sector were insured. In these fields, short-term employment relationships were common, which is why they could not be covered by TEL that required employment relationships of at least six months.
Where applicable, the regulations of LEL corresponded to those in TEL. The key differences were:
- Pension accrued only if the annual earnings exceeded 200 markka (at 1962 index level). The employer was to pay insurance contributions for all earnings received from work in LEL sectors, regardless of the length of the employment relationship or the amount of the earned wage.
- The LEL pension was determined by adding the annual wages earned during the working life, adjusted with the TEL index of the year in which the pension began. The pension was the share calculated using the accrual rate. In the LEL system, the pension was based on the average earnings from the beginning. This principle was introduced in the TEL system only in connection with the 2005 pension reform.