The Employees Pensions Act is the Most Comprehensive Earnings-related Pension Act
A majority of all persons with an earnings-related pension insurance, approximately 60 per cent, are insured based on the Employees Pensions Act (TyEL). All private-sector employees are insured according to the Employees Pensions Act, with the exception of seafarers.
The Act, which came into force in 2007, replaced all previous pension acts concerning wage earners in the private sector: the Employee’s Pensions Act (TEL), the Temporary Employee’s Pensions Act (LEL), and the Pension Act for Performing Artists and Certain Other Employee Groups (TaEL).
The obligation of aprivate-sector employer is to insure all employees between the ages of 18 and 67 whose earnings exceed the insurance obligation limit according to the Employees Pensions Act. In 2016, this limit was EUR 57.51/month. Since the limit is so low, pension security virtually covers all work yielding earnings.
An exception to the obligation to arrange earnings-related pension security is made for foreign employees posted to Finland for a short time. More detailed information on insurance is available at the website Tyoelake.fi.
The employer arranges pension security for his employees from a pension provider of his own choosing. The pension security of the employee can be arranged through a pension insurance company, pension fund or an industry-wide pension fund.
If earnings-related pension security has been arranged through an earnings-related pension provider, it is managed either by way of an insurance based on an insurance contract (contract employer) or by disbursing a contribution to the pension provider (temporary employer).
The employer and wage earner both pay a pension contribution based on the gross wage of the wage earner. The employer’s share of the contribution is larger than that of the wage earner. If the earnings-related pension contribution is raised, the increase is split in half between the contribution shares of the employer and employees. The employer withholds the employee’s share of the contribution straight from the wages and pays the entire insurance contribution to the pension provider.
The earnings-related pension providers and the Finnish Centre for Pensions monitor that the employers pay the earnings-related contribution and report information on their employees to the pension providers. If, despite these measures, contributions are not paid by the employer, the employee is still protected from losing the pension right as long as he or she has proof of the employment.
The Seafarer’s Pension Act (MEL) covers all persons who carry out work defined in the act on a Finnish merchant vessel used in foreign traffic. For ice-breaker vessels, the Seafarer’s Pension Act is applied to the crew and to ship’s officers working under the terms of an employment contract.
The pension security of seafarers is managed in a separate pension fund called the Seafarer’s Pension Fund.
The Seafarer’s Pension Act was the first earnings-related pension act to come into force in 1956. The benefits and funding differ slightly from other types of earnings-related pension acts. The number of people insured according to the Seafarer’s Pension Act has decreased steadily over the last few years. According to the latest statistic, they number about 6,000.
The pension contribution of seafarers has always been split evenly between the employer and employee. The contribution share of the wage earner is more than double that of wage earners insured based on other acts. The state is participating in the financing of seafarer’s pensions by paying a third of the pension expenditure.
The pension security of public sector employees has been regulated in separate acts. The most important of these are the Local Government Pensions Act (KuEL) and the State Employees’ Pensions Act (VaEL).
Of all the insured, approximately 20 per cent are covered by the Local Government Pensions Act and approximately seven per cent by the State Employees’ Pensions Act. At the end of 2013, the pension security of 28,000 people was arranged through smaller public-sector pension acts. Approximately 70 per cent of the insured in the public sector are women.
The public-sector pension provision covers persons employed by in the service of Keva’s member communities. Member communities include municipalities and federations of municipalities and, under certain conditions, municipal limited companies and organisations. Municipal family carers and personal carers, as well as municipal elected officials fall subject to the Local Government Pensions Act. Teachers employed by the municipalities have transferred gradually from the State Employee’s Pensions Act to the Local Government Pensions Act as of 1999.
State employees and officials fall subject to State Employees’ Pensions Act. Comprehensive school and sixth-form college principles and teachers born before 1970 are also covered by this act, as are teachers whose current employment or service began prior to 1 January 1999. University employees born before 1 January 1980 are covered by the State Employees’ Pensions Act. Those born later fall subject to the Employees Pensions Act.
The Evangelical-Lutheran Church Pensions Act (KiEL) covers employees of the Evangelical-Lutheran Church, its parish or federation of parishes who are in the service or employment of the Church.
Employees of the Orthodox Church are insured under the Employees Pensions Act. Only the pensions of priests, deacons and cantors who came into service before 1 January 1994 are now paid according to the pension regulation of the Orthodox Church. The pension security is in line with that in the State Employees’ Pensions Act. Employees of the central and diocese administration, whose employment relationships began prior to 1993, are covered by the State Employees’ Pensions Act.
Officials of the Bank of Finland and the Social Insurance Institution, as well as employees of the regional government of Åland who joined prior to 1 January 2008, have their own pension rules and regulations. Employees of the regional governments of Åland who joined after 1 January 2008 are insured in accordance with the Employees Pensions Act.
The pensions of parliament members, members of the Council of State and the President of the Republic are determined in separate acts. The pension benefits of a Finnish representative elected to the European Parliament are determined, in applicable parts, based on the pension act for parliament members.
Keva manages local government employees’ earnings-related pension security and its financing. Keva also grants and pays out pensions under the State Employees Pensions Act and the Evangelical-Lutheran Church Pensions Act. As of 2012, Keva is also in charge of the enforcement of pension security of the employees of the Social Insurance Institution of Finland.
Keva also manages the enforcement of state pension security for individual customers. The State Treasury is still responsible for certain services directed at the employers. Keva is also responsible for the enforcement of pension security for the personnel of the Evangelical-Lutheran Church and, starting in 2012, that of the officials of the Social Insurance Institution.
The municipal and state pension schemes are different from the employee’s pension acts, mainly due to better accrual in the past and the lower retirement age of certain occupational groups, as well as the definition of vocational disability used when evaluating the right to disability pension.
Public-sector personnel pays the same amount of employee pension contribution as TyEL employees of the private sector. Contributions of public-sector employers are determined differently than those of private-sector employers.