System for Division of Costs
The earnings-related pension scheme is diversified, with several actors in the private as well as the public sectors. Towards the end of 2014, there were a total of 35 pension providers, of which there were 7 earnings-related pension providers and 20 company pension funds and industry-wide pension funds. The pension matters of seafarers and farming entrepreneurs are managed through separate pension providers, as are the pension matters of those working under public sector pension acts.
In due time, the earnings-related pension is granted and paid by the pension provider with which the employee was last insured before retiring. The pension may at this time be funded with several different pension providers, if the insured has worked for many employers in the course of his or her career. Each pension provider is responsible for their own pension shares, throughout the payment of the pension.
The pension provider that in time will be paying the pension, charges the other pension providers for shares they may possibly have in the pension trough a cost distribution clarification carried out by the Finnish Centre for Pensions and according to the principle of the last provider.
In the cost distribution clarification, each pension paid out in accordance with the Employees or Seafarer’s Pension Act is divided in two based on the principle of partly funded financing technique; the funded pension share and the balancing share based on the distribution system. The distribution is carried out for each individual pension. The funded share of the pension is always the responsibility of the pension provider that has insured the employment in question, but the unfunded share, the balancing share, is the joint responsibility of the pension providers.
Pensions according to the pension acts of the self-employed and farming entrepreneurs are not funded. Pension providers engaging in YEL activity usually pay the YEL pensions jointly, and the Farmers’ Social Insurance Institution pays MYEL pensions. The State is involved in the funding of YEL, MYEL and MEL pensions. Pension providers in the public sector are responsible for the costs of their statutory pension provision.