Supplementary Pension Provision

As a result of the 2017 pension reform, the age limit for voluntary pension insurance has risen and is the same as the age at which the insurance obligation for the birth year in question ends.

Year of birth Age when insurance obligation ends
1957 or earlier 68 years
1958-1961 69 years
1962- 70 years

The tax benefit for the contributions for voluntary pension insurance and long-term savings accounts that have begun before 2013 follow former rules. The age limit for the tax benefit of the contributions for voluntary pension insurance rose to 68 years already as of the beginning of 2013.

The rising age limit applies also to group supplementary pension policies if the employee pays part of the contribution. If the employer pays the total contribution, the pension may begin earlier. Pension received from a supplementary pension arranged by the employer is taxed as earned income.

Supplementary pensions complement statutory pensions

In accordance with the traditional international classification, pension provision is divided into three pillars.

First pillar pensions are statutory pensions. In Finland, such pensions are the national and the earnings-related pensions.

Second-pillar pensions are collective industry- or employer-specific pension schemes. In Finland, such schemes include group pension insurance arranged by the employer.

Third-pillar pensions are private, voluntary pensions. In Finland, they may be individual pensions or long-term saving accounts. People may prepare for their retirement also by saving in other ways.

The significance of supplementary pensions increases if the income in retirement would be low otherwise due to, for instance, long periods of study, unemployment or child care. In addition to raising the level of income in retirement, voluntary supplementary pension provision sometimes offers the possibility to retire before reaching the retirement age.

Role of supplementary pensions in Finland

Contrary to the case in many other countries, the role of third-pillar supplementary pensions is not very significant in Finland. Statutory pensions are broad in scope, and neither the pensionable earnings nor the pension amount have a ceiling.

In international comparison, the share of supplementary pension provision of the total pension provision is small. Viewing from the point of view of pension contributions, the total pension provision consists to 94 per cent of statutory pensions and to 6 per cent of supplementary pensions.

Pension insurance in Finland 2015

The premium income of the national pension includes only pensions (not, for example, housing and disability benefits).

Source: Kela and Financial Supervisory Authority

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