Statutory Earnings-related Pension Contributions

Statutory earnings-related pension contributions charged from the employee’s wage are paid by employers and employees in both the private and public sectors. The self-employed and farming entrepreneurs also have to pay pension insurance contributions on their income from work.

The basis for pension contributions and confirmed contribution rates vary with pension type. However, with the exception of sailors, all employees are charged an earnings-related pension contribution according to age.

Contribution rates for earnings-related pensions in 2018

 Contribution accrual  Employees  Contribution share, %
   % of gross wages 1)  under 53  and 63 and above  53-62 years 
Wage earners
 Employees Pensions Act (TyEL)  24.4   6.35   7.85
 Seafarer’s Pensions Act (MEL)  20.0 6.35 7.85
 Public Sector Pensions Act (JuEL)/State  23.76   6.35   7.85
 The self-employed
 Self-employed Persons’ Pensions Act (YEL)  23.0  24.1 2)  25.6 2)
 Farmers’ Pensions Act (MYEL)  13.8/13.6 3)  24.1 4)  25.6 4)

1) Contribution accruals are estimates.
2) Confirmed YEL contributions without discounts for the newly self-employed. Ages at the beginning of the year.
3) The average contribution rate of farming entrepreneurs is 13.8 and that of grant recipients 13.6 per cent.
4) Confirmed basic MYEL rates. Ages at the beginning of the year.

Employers report the earnings of their employees to the pension providers, disbursing both the employer and employee share of the contribution. The self-employed and farming entrepreneurs manage their own pension contributions by paying them directly to their own pension provider.

A certain share of the unemployment insurance contributions is transferred to costs derived from earnings-related pensions. The state also pays part of the costs for seafarer pensions as well as shares of the pension expenditure for the self-employed and farming entrepreneurs that are not covered by insurance contributions alone. 60 per cent of the annual state pension expenditure is also funded from the state budget.

The average level of earnings-related pension contributions is affected by how contribution bases are prepared according to different acts, and confirmed through methods required by each earnings-related pension act. The final, detailed contribution accrual is not settled until data on the realized contributions and wage sums of employers has been established.

Contribution rates for the self-employed and farming entrepreneurs, confirmed in advance, are tied to the average TyEL contribution. In the municipal sector and for the state, pension contribution rates also follow the average TyEL contribution, taking into account the specific features of these fields.