Chapter VII: Old-age

Applicable statutory basis

Basic principles

Field of application

Exemptions from compulsory insurance for insignificant employment




Partial pension

Accumulation with earnings


Social security contributions from pension




TopApplicable statutory basis

Law of 31 May 1937

Law of 8 July 1961

National Pensions Act 347/1956 (KEL)

Seamen’s Pensions Act 72/1956 (MEL)

Employees’ Pensions Act 395/1961 (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 (YEL)

Farmers’ Pensions Act 467/1969 (MYEL)

Freelance Employees’ Pensions Act 662/1985 (TaEL)


TopBasic principles

Dual system of insurance system (employment pension) covering all economically active persons (employees, self-employed, farmers) and an universal coverage system (national pension) guaranteeing a minimum pension. The pension schemes are integrated and when other pension income is above a given limit no national pension is paid. Voluntary supplementary company schemes exist but are of relatively small importance.


TopField of application

National pension: Compulsory coverage for all residents aged 16 to 65.

Employment pension: 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. (For special rules of farmers see also table XIII.1).


TopExemptions from compulsory insurance for insignificant employment

Employees: no exemption (for short term, low income employment pension 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 insurable income exceeds FIM 27,760/year (ECU 4,637) for self-employed and FIM 13,880/year (ECU 13,880) for farmers.



1. Minimum period of membership

National pension:

3 years of residence in Finland after the age of 16.

Employment pension:

1 month of employment and salary above given minimum (TEL: FIM 1,157/month = ECU 193).

For shorter employment periods and/or income below the minimum, pension is accrued if the total annual income is above FIM 3,650 FIM/year (ECU 610).

Self-employed and farmers:

From beginning of insurance

2. Conditions for drawing full pension

National pension: 40 years of residence in Finland between the ages of 16 and 65 for a full pension.

Employment pension: 40 years of employment/self-employment.

3. Legal retirement age

Standard pension

65 years.

Early pension

Early old-age pension from the age of 60 (no other conditions).

Accrued old age pension actuarially reduced. Reduction is permanent.

Farmers: See Table XIII.

Deferred pension

Deferment possible (no upper age limit).



1. Determining factors

National pension: duration of residence in Finland, marital status, municipality of present residence and amount of other pensions.

Employment pension: Length of time insured and level of earned income

2. Calculation method or pension formula

National pension:

Full amount FIM 2,178-2,591/month (ECU 364-433). If years of residence are less than 40 the pension is proportional to the length of residence. Employment pension or other statutory Finnish or foreign pensions received reduce the national pension by 50 %.

Employment pension:

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: not applicable.

Employment pension:

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

Basically none. However, if leave from work due to e.g. maternity, military service etc. is less than one year, this year is credited in most pension schemes (not LEL, TaEL). Disability pension periods are fully credited.

5. Supplement for dependants:


National pension: no new supplements granted after 1.1.1996. Spouse increase FIM 243 (ECU 41) 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: no supplement.


National pension:

No new supplements granted after 1.1.1996. Spouse increase FIM 209 (ECU 35) 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:

Care allowance: 3 categories: FIM 278 (ECU 46), 691 (ECU 115) and 1,382 (ECU 231) per month. Payable to compensate for costs arising from home care or other special expenses caused by illness or injury.

Pensioners housing allowance: 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 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: The total maximum pension is 60% of the highest pensionable salary. The pensions of the two schemes are integrated, the maximum being 60 % of the pensionable salary.

9. Early pension

The pension is permanently reduced by 0.5% per month the pension is taken early.

10. Deferment

The amount of pension is increased by 1% per month beyond the age of 65.



National pension: annually on the basis of the evolution of the cost-of-living index.

Employment pension: annually according to the weighted average of price and wage changes (two separate weights are used for pensions payable to persons under/over 65).


TopPartial pension

Part-time pension payable to persons aged 58-64. Temporarily reduced to 56 years between 1.7.1998 - 31.12.2000. 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.


TopAccumulation with earnings

Accumulation possible. Earnings do not affect entitlement or amount of old age pension.



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 only, no income tax is paid. See point 2 below. Care allowance and pensioners housing allowance 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 33,800 (ECU 5,645)

married person: FIM 28,600 (ECU 4,777)

Government taxes:

FIM 23,100 (ECU 3,858): 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 82,086 (ECU 13,710)

married FIM 69,457 (ECU 11,601)

Government taxes: FIM 56,100 (ECU 9,370).


TopSocial security contributions from pension

Sickness insurance premium for pensioners is 1.50 % of taxable income up to FIM 80,000 (ECU 13,362) 1.95 % on exceeding taxable income plus additionally 2.70 % on pension income.

No other contributions.