The Social Insurance Institution of Finland (Kela) pays compensation in the form of a sickness allowance for disability lasting for less than one year. When the ability to work has been reduced (due to illness, handicap or injury) for at least one year, the pension provider and/or Kela compensates the loss of income with a cash rehabilitation benefit or a disability pension. Compensation based on workers’ compensation insurance and motor liability insurance are primary in relation to the pension insurance.
A pension provider may grant a disability pension to an insured person who has turned 17 but who has not reached their retirement age (determined based on the birth year). In the national pension scheme, the disability pension may be granted to an insured person who is between 16 and 64 years old.
The disability pension benefits of the earnings-related pension scheme are:
- the disability pension,
- the partial disability pension,
- the cash rehabilitation benefit, and
- the partial cash rehabilitation benefit.
The disability pension turns into an old-age pension of the same amount when the pension recipient reaches their retirement age. A partial disability pension turns into an old-age pension of the same amount as a full disability pension. After reaching the retirement age, the person can also be granted new pension accrued for work done while receiving a partial disability pension.
At the end of 2021 about 125 000 persons drew a disability pension from the earnings-related pension system. About 19 000 new disability pensions were granted in 2021.
Cash rehabilitation benefit during rehabilitation
The cash rehabilitation benefit is a disability pension paid for a fixed period of time. It can be granted to a person who has lost their ability to work temporarily and whose handicap or illness is expected to improve through rehabilitation. A requirement for the cash rehabilitation benefit is that a treatment or rehabilitation plan has been drawn up for the applicant. The cash rehabilitation benefit is of the same amount as the disability pension. If the insured person’s ability to work is not restored, the cash rehabilitation benefit can be converted into a disability pension granted until further notice.
87 per cent of the disability pensions granted in 2021 were cash rehabilitation benefits.
Partial disability pension for partial loss of ability to work
If the insured person’s work ability is reduced by three fifths, they will be granted a full disability pension. A partial disability pension is paid if the work ability is reduced by at least two-fifths. The partial disability pension is half of the insured person’s full disability pension.
The number of partial disability pension recipients has grown. Particularly in the public sector, partial disability pensions have become more common in the 2010s. Nevertheless, there are fairly few pensioners on a partial disability pension compared to the number of pensioners on a full disability pension. At the end of 2021, about 18 per cent of all pensioners on a disability pension drew a partial disability pension.
Remaining working capacity and rehabilitation
In addition to medical factors, the insured person’s ability to get an income through reasonable, available work will be considered when assessing their right to get a disability pension. Factors such as education, previous work, age and place of residence are taken into account when making the assessment.
The definition of occupational disability is applied for the insured over the age of 60 in the private sector and for all insured in the public sector. Occupational disability refers to the lack of ability to perform occupation-related tasks.
Vocational rehabilitation arranged by pension providers takes precedence over the disability pension. The aim of rehabilitation within the earnings-related pension scheme is to help the insured to continue working or to return to work and thus reduce or at least postpone the need to retire on a disability pension.
Disability pension components
The disability pension consists of the pension accrued for the insured person’s work history and the projected pension component. The purpose of the projected pension component is to compensate the insured for the loss of income from the time of retirement on a disability pension to reaching the retirement age. A significant part of a young person’s disability pension is made up of the projected pension component. The fixed-term cash rehabilitation benefit and the disability pension granted until further notice are determined in the same way.
An insured person whose earnings have totalled at least 19,578.92 euros (in 2023) during the 10 calendar years before the start of the disability pension has a right to get the projected pension component.
The projected pension component is calculated from the beginning of the year of the pension contingency until the end of the month in which the person reaches their retirement age. If the retirement age has not been confirmed for the birth year of the person in question, the projected pension component is calculated until the retirement age of the nearest age cohort with a confirmed retirement age. In other words, for those born in 1965 or later, the projected pension component will end at age 65, which is the most recent confirmed retirement age (for those born in 1964).
In general, the projected pension component is determined based on the earnings during the five calendar years before the disability began.
Lump-sum increase based on age
Since 2010, disability pensions that have continued for five years have been increased permanently with one lump-sum increase. The purpose of the lump-sum increase is to improve the level of disability pensions, particularly for the young.
The lump-sum increase is made when five years have passed since the beginning of the disability pension or the cash rehabilitation benefit. The amount of the increase depends on the age of the pension recipient. For those aged 31 or under, the increase is 25 per cent. The increase is reduced by one percentage point per one year of age. If the pension is granted after the person has turned 50, no lump-sum increase is made.
Vocational rehabilitation extends working lives
Pension providers arrange vocational rehabilitation for persons insured under the earnings-related pension acts. The purpose of vocational rehabilitation is to prevent disability and improve chances to earn an income. To get vocational rehabilitation arranged by a pension provider, the insured must have earned a total of 39,157.84 euros (in 2023) for a total of five years before the disability began.
Vocational rehabilitation includes, for example, workplace rehabilitation and training. The pension provider pays a rehabilitation benefit during the rehabilitation period. Rehabilitation benefits are:
- the rehabilitation allowance,
- the partial rehabilitation allowance,
- the rehabilitation increment, and
- the rehabilitation assistance.
The most common benefit is the rehabilitation allowance, which is the amount of the cash rehabilitation benefit, increased by 33 per cent. If an employee earns more than half of their stabilized earnings during the rehabilitation period, they get a partial rehabilitation allowance. The partial rehabilitation allowance is half of the full rehabilitation allowance.
Approximately 18,400 persons participated in the vocational rehabilitation arranged by pension providers in 2021. The rehabilitation expenditure amounted to 184 million euros.
In 2021, a total of 8,000 rehabilitation programmes came to an end and 62 per cent of the rehabilitees returned to working life while 12 per cent retired. Of those who retired, half retired on a partial rather than a full disability pension.
A person drawing a full disability pension may earn a maximum of 40 per cent of their stabilised average earnings before retirement. A person drawing a partial pension can earn 60 per cent of their stabilised pre-retirement average earnings.
The aim is to promote employment among those those who get a disability pension. According to a provisional act promoting the return to work, a person working while getting a full or a partial disability pension can earn at least 922.42 euros/month (in 2023). The provisional act will be in force until the end of 2024. An increase in the minimum earnings limit offers better opportunities for low-income retirees on a disability pension to work or try to work.
If the earnings exceed the earnings limits, the pension payments are suspended for at least three months and no more than two years.
Of those drawing a full disability pension, about 13 per cent are working, while the equivalent figure for those getting a partial disability pension is 80 per cent. Partial disability pensions are more common in the public sector than in the private sector.