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Applicable statutory basis
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| Applicable statutory basis |
National Pensions Act 347/1956 (Kansaneläkelaki, KEL).
Seamen's Pensions Act 72/1956 (Merimieseläkelaki, MEL).
Employees' Pensions Act 395/1961 (Työntekijäin eläkelaki, TEL).
Temporary Employees' Pensions Act 134/1962 (LEL).
Local Government Employees' Pensions Act 202/1964 (KVTEL).
State Employees' Pensions Act 280/1966 (VEL).
Evangelical-Lutheran Church Pensions Act 298/1966 (KiEL).
Self-employed Persons' Pensions Act 468/1969 (Yrittäjien eläkelaki, YEL).
Farmers' Pensions Act 467/1969 (MYEL).
Pension Act for Performing Artists And Certain Other Employee Groups 1056/1998 (TaEL). |
| Basic principles |
Dual system of insurance system (employment pension, Työeläke) covering all economically active persons (employees, self-employed, farmers) and an universal coverage system (national pension, Kansaneläke) guaranteeing a minimum pension.
The pension schemes are integrated and when other pension income is above a given limit no national pension (Kansaneläke) is paid. Voluntary supplementary company schemes exist but are of relatively small importance. |
| Field of application |
National pension (Kansaneläke):
Compulsory coverage for all residents aged 16 to 65.
Employment pension (Työeläke):
All employees, self-employed persons and farmers aged 23 to 65.
Separate laws for different groups (see above; the most important law is the Employees' Pensions Act, TEL) adapting the general principles to different circumstances. |
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Exemptions from compulsory insurance
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| Exemptions from compulsory insurance |
Employees:
No exemption (for short term, low income employment pension, Työeläke, accrual see below "Benefits. 2. Calculation method or pension formula").
Self-employed, farmers:
Liable to take out insurance after 4 months of self-employment and when the annual insurable income exceeds FIM 28,947 (EUR 4,869) for self-employed and FIM 14,473 (EUR 2,434) for farmers. |
| 1. Determining factors |
National pension (Kansaneläke):
Duration of residence in Finland, marital status, municipality of present residence and amount of other pensions.
Employment pension (Työeläke):
Length of time insured and level of earned income |
| 2. Calculation method or pension formula |
National pension (Kansaneläke):
Full amount between FIM 2,231 (EUR 375) and FIM 2,655 (EUR 447) per month according to marital status and municipality. If years of residence are less than 40 the pension is proportional to the length of residence. Employment pension (Työeläke) and other Finnish or foreign pensions received reduce the national pension (Kansaneläke) by 50%.
Employment pension (Työeläke):
The target is 60% of pensionable salary after 40 years. The accrual rate is 1.5% of reference earnings (see below "Reference earnings or calculation basis") per year, increased to 2.5% after the age of 60. |
| 3. Reference earnings or calculation basis |
National pension (Kansaneläke):
Not applicable.
Employment pension (Työeläke):
Pensionable salary is based on the earnings of the last 10 years and calculated separately for each employment relationship. The number of years to be taken into account will be gradually raised from the former 4 years to 10 years starting from 1996. The full 10-year period being fully in effect by the year 2005. Years with exceptionally low annual income will not be taken into account. No ceiling for reference earnings. |
| 4. Non-contributory periods credited or taken into consideration |
Employment pension (Työeläke):
Basically none. However, if leave from work due to e.g. maternity is less than one year, this year is credited in most pension schemes (not Temporary Employees' Pensions Act, LEL, and Pension Act for Performing Artists And Certain Other Employee Groups, TaEL). Disability pension (Työkyvyttömyyseläke) periods are fully credited. |
| 5.1. Supplements for dependants: Spouse |
National pension (Kansaneläke):
No new supplements granted after 1.1.1996. Spouse increase FIM 81 (EUR 14) per month, if the spouse has no income of his/her own and the supplement was granted before 1.1.1996. The supplement is gradually reduced by one fifth a year starting from 1997 and will be abolished by 2001.
Employment pension (Työeläke):
No supplement. |
| 5.2. Supplements for dependants: Children |
National pension (Kansaneläke):
No new supplements granted after 1.1.1996. Child increase FIM 105 (EUR 18) month/child, under the age of 16 if the supplement was granted before 1.1.196. The supplement is gradually reduced by one fifth a year starting from 1998 and will be abolished by 2002. |
| 6. Special supplements |
National pension (Kansaneläke):
Pensioners' care allowance (Eläkkeensaajien hoitotuki):
3 categories: FIM 284 (EUR 48), FIM 708 (EUR 119) and FIM 1,415 (EUR 238) per month. Payable to compensate for costs arising from home care or other special expenses caused by illness or injury.
Pensioners' housing allowance (Eläkkeensaajien asumistuki):
May be awarded to a pensioner residing in Finland. The amount is proportional to the pensioner's income and housing costs as well as some other factors. |
| 7. Minimum pension |
No minimum pension. National pension (Kansaneläke) guarantees in practice a minimum pension to those with 40 years of residence in Finland and with a small pension or with no other pension. |
| 8. Maximum pension |
Employment pension (Työeläke):
No maximum amount. The total maximum pension is 60% of the highest pensionable salary. |
| 9. Early pension |
The pension is permanently reduced by 0.4% per month the pension is taken early. |
| 10. Deferment |
The amount of pension is increased by 0.6% per month beyond the age of 65. |
| Adjustment |
National pension (Kansaneläke):
Annually on the basis of the evolution of the cost-of-living index.
Employment pension (Työeläke):
Annually according to the weighted average of price and wage changes (two separate weights are used for pensions payable to persons under/over 65). |
| Partial pension |
Part-time pension (Osa-aikaeläke) payable to persons aged 58-64. Temporarily reduced to 56 years between 1.7.1998 – 31.12.2002. Working hours have to be reduced considerably (to 16-28 hours per week) and the income has to be reduced to 35-70% of earlier earnings. The pension is 50% of the loss of income. |
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Accumulation with earnings
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Taxation and social contributions
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| 1. Taxation of pension benefits |
Pensions are fully liable to taxation and taxed as other earnings (e.g. wages).
However, small pensions are entitled to a special pension deduction. Thus if the income consists of national pension (Kansaneläke) only, no income tax is paid. See point 2 below.
Pensioners' care allowance (Eläkkeensaajien hoitotuki) and pensioners housing allowance (Eläkkeensaajien asumistuki) are not taxed. |
| 2. Limit of income for tax relief or tax reduction |
The amount of the full pension deduction for pension income per year is:
Local taxes:
single person:
FIM 34,900 (EUR 5,870)
married person:
FIM 29,500 (EUR 4,962)
Government taxes:
FIM 23,200 (EUR 3,902): for all.
When pension is higher than the full pension deduction amount, the deduction is reduced by 70% of the exceeding amount. Pension deduction = Full deduction - 70% (pension-full deduction)
No deduction is given when the pension is higher than
Local taxes:
single: FIM 84,755 (EUR 14,255)
married: FIM 71,641 (EUR 12,049)
Government taxes:
FIM 56,341 (EUR 9,476). |
| 3. Social security contributions from pension |
Sickness insurance premium for pensioners is 1.5% of taxable income plus additionally 1.7% on pension income.
No other contributions. |
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