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Photo: Karoliina Paatos

According to a recent report by the Finnish Centre for Pensions, the take-home pension will grow for all income levels in 2024. The purchasing power can also be expected to increase after a drop in previous years.

The report Total pension in Finland 2024 (published in Finnish on 6 February and now available also in English) explains how the earnings-related pension, the national pension and taxation are determined in 2024. The adjustments to the pension indexes were large at the beginning of the year, but the rise in prices is expected to slow down. Index adjustments raised earnings-related pensions in payment by 5.7 per cent and pensions paid by Kela by 5.9 per cent.

Special Adviser Suvi Ritola (Finnish Centre for Pensions) estimates that the taxation of pensions will ease somewhat and net pensions will rise by 5–6 per cent.

“If inflation remains at the projected level of around 2 per cent, the purchasing power of pension recipients will grow by 3–4 per cent.”

Over the last ten years, the pension of recipients receiving only a Kela pension has grown in real terms by around 8 per cent. After the 2022 bump, pensions above this level are essentially at the same real level as 10 years ago. In the higher income levels, pensions have decreased by slightly less than 2 per cent.

National pension supplements the earnings-related pension

Low-income pensioners have not necessarily earned much earnings-related pension. In such cases, the national pension supplements their pension income. The amount of the national pension depends not only on the amount of the earnings-related pension received but also on whether the pension recipient lives alone or with a spouse.

“In 2024, no national pension is paid to single persons living alone who receive a monthly earnings-related pension of over 1,601 euros, or to persons living with a spouse or partner and who receive a monthly earnings-related pension of over 1,435 euros”, Ritola explains. 

The index adjustments were made to Kela pensions at the beginning of the year as usual, but other benefits linked to the national pension index were frozen. For example, index adjustments to pensioners’ housing allowance have been frozen for the period 2024–2027.

The guarantee pension ensures a minimum monthly pension of 976.54 euros for all pensioners.

Tax relieves

Pensions are subject to income tax if the monthly pension is more than around 1,100 euros. Pension recipients get a pension income deduction that relieves taxation.

Wage earners, on the other hand, get both an earned income deduction and a credit for work income, and pays earnings-related and unemployment insurance contributions. The aim is to encourage older people to work by increasing the credit for work income for employees aged 65 and over.

The municipal tax levied by the municipality of residence affects taxation. In 2024, the average municipal tax rate is 7.46 per cent, slightly higher than in 2023.

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Finnish Centre for Pensions – Central body of and expert on statutory earnings-related pensions