Individual Pension Insurance and Long-term Savings Accounts Taxed as Capital Income
As of the beginning of 2005, after a brief transition period, voluntary individual pension has been taxed as capital rather than earned income.
Contributions to long-term savings accounts are deductible in the capital income taxation in the same way as are the contributions to voluntary pension insurance policies. The return for invested assets is not taxed during the savings period.
Payments paid by the service provider to the saver or other person entitled to the assets according to the savings contract when the person in question has reached the retirement age are considered capital income for the recipient. Taxable capital income is subject to a capital income tax of 30 per cent.
Contributions to a voluntary pension insurance or a long-term savings account can be deducted from the capital income to an annual amount 5,000 euros per year. If the employer has taken out such insurance for the taxpayer, the contributions for an insurance or long-term savings account taken out privately can be deducted to a maximum annual amount of 2,500 euros.
The retirement age entitling to tax deductions in individual pension insurance has been raised on several occasions (see table below). As of the beginning of 2013, the retirement age is 68 years for new insurance policies and long-terms savings accounts.
The retirement age at the time of taking out the insurance
| Insurance taken out | Age at which pension starts, years |
| – 30 Sept. 1992 | 55 |
| 1 Oct. 1992 – 23 June 1999 | 58 |
| 24 June 1999 – 5 May 2004 | 60 |
| 6 May 2004 – 17 Sept. 2009 | 62 |
| 18 Sept. 2009 – 31 Dec. 2012 | 63 (in most cases; the retirement age under the Employees Pensions Act) |
| 1 Jan. 2013 – | 68 |
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