Pension Coverage and Insurance
Pension insurance secures an individual’s livelihood in the event of various long-term risks. The national pension covers everyone living in Finland who meets the minimum requirements for residence. Earnings-related pensions cover everyone in gainful employment.
In Finland, the earnings-related pension accrues from almost all gainful employment, and there are several earnings-related pension acts. Wage earners earn earnings-related pension security mainly under the Employees Pensions Act (TyEL), the Seafarer’s Pensions Act (MEL) and, as of the beginning of 2017, the Public Sector Pensions Act (JuEL). The Public Sector Pensions Act combines the rules on earnings-related pensions of the Local Government Pensions Act (KuEL), the State Employees’ Pensions Act (VaEL), the Evangelical-Lutheran Church Pensions Act (KiEL) and the Act on the Social Insurance Institution of Finland (KelaL).
Self-employment is insured under the Self-Employed Persons’ Pensions Act (YEL) or the Farmers’ Pensions Act (MYEL).
As a rule, private sector pension security is arranged with insurance contracts. The pension security of wage earners in the public sector is determined automatically under the public sector pension acts based on their employer.
Approximately 2.3 million persons were insured under earnings-related pension acts at the end of 2015.
The Finnish earnings-related pension system was created in the 1960s
For the main part, the earnings-related pension acts came into force in the 1960s. The employees and officials of the State and municipalities were insured already before that, but the new public sector pension acts ensured that all employees working for a public-sector employer were covered.
Pensions have been improved throughout the years. An extensive pension reform was carried out in 2005, as a result of which earnings gained a wider role in pension accrual.
Pensions were reformed again in 2017 and included the following changes:
- the retirement ages will rise gradually,
- employees earn a pension already from the age of 17, and
- pension accrues at a standardized rate of 1.5% of the gross wage (regardless of age).
In addition, two new pension types were introduced:
- the partial old-age pension, and
- the years-of-service pension.
A number of new groups have been given the right to earn pensions in the 2000s. In 2000, an act was passed on accident and pension security for athletes. From the beginning of 2009, researchers and artists working on a grant were included under the Farmers’ Pensions Act (MYEL). In 2011, the guarantee pension was introduced. It ensures a minimum pension for persons who live in Finland.
Important dates in the history of Finnish pension security expansion
- 2017 Pension reform. Retirement ages will increase gradually. The pension accrual rate was standardised to 1.5% of the entire gross wage. New pension forms: partial old-age pension and years-of-service pension. The rules of the public sector pension acts (KuEL, VaEL, KiEL and KelaL) merge into one act, the Public Sector Pensions Act (JuEL)
- 2011 Guarantee pension
- 2009 Researchers and artists working based on a grant included in MYEL
- 2007 TEL, LEL and TaEL combined to make TyEL, where the lower limit for insurance is very low
- 2005 Pension reform, changes included pension accrual from the whole career span incl. retirement
- 2000 Act on Accident and Pension Security for Athletes
- 1998 All short employments/low wage employment covered by pension security
- 1986 Pension Act for certain artists and reporters in employment (later the Pension Act for Performing Artists and Certain Other Employee Groups) (TaEL)
- 1970 Self-Employed Persons’ Pensions Act (YEL) and Farmers’ Pensions Act (MYEL)
- 1967 State Employees’ Pensions Act (VEL, since 2007 VaEL)
- 1966 The Evangelical-Lutheran Church Pensions Act (KiEL)
- 1964 Local Government Employees’ Pensions Act (KVTEL, since 2003 KuEL)
- 1962 Employees’ Pensions Act (TEL) and for short-term employment contracts, the Temporary Employees’ Pensions Act (LEL).
- 1956 The Seafarer’s Pension Act (MEL) and the new national pension act (KEL)