Newly self-employed underinsure themselves

Two out of five newly self-employed set their confirmed income from self-employment (YEL income) at the lowest or nearly the lowest possible level. This is nearly twice as many compared to three years ago. Statistics from the Finnish Centre for Pensions shows that every fifth of all self-employed persons set their YEL income at the lowest level.

In 2017, the average YEL income from work of all self-employed was 22,600 euros per year. This was slightly lower than in 2016. Men’s average YEL income from self-employment was around 23,600 euros and women’s around 20,600 euros per year. The average YEL income has been at the same level for quite some time now.

The self-employed person’s earnings-related pension is based on the YEL income. The YEL income should be set at such a level that it corresponds to the work input of the self-employed person. On average, the YEL income is 70 per cent lower than the taxable earnings.

“Half of the confirmed annual YEL income is below 16,000 euros. Typically, it is set around the lower limits of YEL insurance or unemployment security,” explains Eeva Poutiainen, Development Manager at the Finnish Centre For Pensions.

Newly self-employed tend to underinsure themselvels

Roughly 205,000 self-employed persons had taken out YEL insurance in 2017. Every fifth (22%) of them set their YEL income at or near the lowest level (€7,645).

The share is even higher among the newly self-employed: nearly two out of five (or 39%) underinsured themselves. This is nearly twice as many compared to three years ago.

The average YEL income of the newly self-employed was around 16,000 euros in 2017. This was slightly lower than in 2016.

”The share of underinsured newly self-employed persons has grown rapidly since 2015. Many newly self-employed persons have also set their YEL income at the lower limit for unemployment security. As of 2015, that limit has been higher than before,” Poutiainen says.

YEL income defines the basis for social security

The pension insurance under the Self-employed Persons’ Pensions Act (YEL) forms the basis of the pension and social security for the self-employed. It provides an income when self-employment ends due to unemployment or old age. Survivors’ pension paid to the surviving spouse and the children secure the family’s income after the death of the other spouse or parent.

“The Self-employed Persons’ Pensions Act puts the self-employed in a difficult position. They have to choose between their current income level and their income level in retirement. When the insurance is set at an unnecessarily low level, the social security and pension of the self-employed person are weak,” Mikko Kautto, Director at the Finnish Centre For Pensions, points out.

The benefit and pension amounts are based on the self-employed person’s YEL income. The pension contributions and the pension, as well as many social security benefits, such as the sickness allowance, unemployment security and parenthood allowances, are based on the self-employed person’s YEL income.

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Insurance of the Self-employed is Based on the YEL income

More information
Mikko Kautto, Director, phone +358 29 411 2185, +358 40 740 8095, mikko.kautto(at)
Eeva Poutiainen, Development Manager, phone +358 29 411 2219, eeva.poutiainen(at)
Ari Kaartinen, Mathematician, phone  +358 29 411 2638,


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