1. The earnings-related pension
a part of social insurance
Taina Hedman
7.9.2013

2. earning-related pension that accrues from work
Finnish Centre for Pensions2
 Central body for the earnings-related pension
scheme over 50 years in Finland
 Provides services common to the decentralised
earnings-related pension scheme
 Carries out research, collects statistics, follow-up
of reforms, keeps register over employment
relationships
 House who knows pensions

3. Finnish Centre for Pensions 3
Health
insurance
Accident
insurance
National pension
Guarantee pension
Pension
insurance
Other
(e.g. voluntary
supplementary
pensions)
Unemployment
insurance
Employees’ group life
insurance
Earnings-related
pension
Social Insurance

4. • Earnings-related pension
– Secures a reasonable
consumption level after
retirement
– Right to pension earned
through work
– Benefit paid by earnings-
related pension
institutions
– No pension ceiling
Finnish Statutory Pension Provision
• National pension and
guarantee pension
– Secures a minimum level
of income
– Supplements a small
earnings-related pension
– Amount depends on
time of residence in
Finland and family
relations
– Benefit paid by the Social
Insurance Institution of
Finland (Kela)
Total pension =
Guarantee pension + National pension +
Earnings-related pension

5. Total pension in 2013
0
250
500
750
1000
1250
1500
1750
0 500 1000 1500 2000 2500 3000 3500
Pension
EUR/month
Wage
EUR/month
Guarantee pension
National pension
Earnings-related pension
Net

6. Earnings-related pension accrues from
working!
The Finnish Centre for Pensions6
 The earnings-related pension is a central part of
Finnish social security.
 The earnings-related pension ensures that
employees and the self-employed can maintain their
standard of living after retirement.
 The longer your working career, the better your
pension!
 The residence-based national pension and the
guarantee pension secure a minimum income.
 Together, the earnings-related and the national
pension ensure the wellbeing in case of disability
and old age.

7. Earnings-related pension Contributions
Finnish Centre for Pensions7
 Employers and employees pay their share of the
pension contribution
 Employer withholds employee’s share of the
contribution from wages and pays the entire
contribution to the pension provider
 Earnings-related pension contributions are fully
deductible in the taxation for employees

8. Earnings-related pension Contributions
Finnish Centre for Pensions8
 Contribution percentages are affirmed annually by
the Ministry of Social Affairs and Health
Employer with
insurance contract
23.4% when payroll <
EUR 1,879,500
Contribution category
model when payroll
> EUR 1,879,500
Occasional
employer
23.8% Employee’s
share
5.15%
< 53 yrs
6,50%
≥ 53 yrs

9. Determining the
Earnings-related Pension
Finnish Centre for Pensions9
 Old-age pension accrues as of age 18
 Pension accrual rates:
18–52 yrs: 1.5%
53–62 yrs: 1.9%
63–67 yrs: 4.5%
 Also on the basis of social benefits determined by law, for
periods of home care of child under the age of three and for
periods of study
 Earnings adjusted by wage coefficient in line with the level at
the start of the pension
 Proportioned to life expectancy by means of life expectancy
coefficient
Earnings-
related
pension =
annual
earnings X
accrual rate

10. When and on which pension?
The Finnish Centre for Pensions
• Retirement due to illness at age 18 – 62
– Vocational rehabilitation (for those in working life)
– Cash rehabilitation benefit
– Disability pension
• Flexibly on old-age pension according to own choice at
age 63-68.
• An elderly employee or self-employed person may
reduce his or her workload by retiring on a part-time
pension.
• Survivors’ pension secures the income of the surviving
spouse and children if the family’s breadwinner dies

11. How Pension Accrues
• Pension accrues from all wages earned between the ages of 18 – 68 years
• Pensions accrues also for studies and for staying at home with one’s own child under the
age of 3
• Working abroad: according to the rules of the country of employment
Illustration: Anssi Keränen
ANNUAL EARNINGS
X
ACCRUAL RATE

12. Funding of Earnings-related Pensions
• Everyone is first a payer, then a receiver
• Part of the contribution is funded for future generations
Illustration: Anssi Keränen
Pension recipient
EUR 20.5 bn
+ public sector
Employee
Employer /
Self-employed
EUR 21.5 bn
Earnings-related
pension insurer
EUR 155 bn

13. Is There Enough Money?
• The number of retired persons grows and people live longer
• Working lives have to be extended to maintain a reasonable contribution level
• Returns on earnings-related pension funds are of great significance
Illustration: Anssi Keränen
OLD-AGE DEPENDENCY
RATIO
OLD-AGE DEPENDENCY
RATIO

14. Check How Much Pension You Have Earned!
• You can access your Pension Record online (only in Finnish and Swedish) at
ww.tyoelake.fi or receive a printed record to your home address every third year
Illustration: Anssi Keränen

15. Sources of Information
• www.tyoelake.fi
• www.keva.fi
• www.kela.fi
• Finnish Centre for Pensions
customer information 029 411 2801
switchboard 029 411 20
e-mail firstname.lastname@etk.fi
visiting address Kirjurinkatu 3
postal address FI-00065 ELÄKETURVAKESKUS
Finland
Eläketurvakeskus 15