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Pension plans in Helsinki

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There are two complementary pension systems in Finland : earnings-related pensions linked to past employment and national pensions linked to residence in Finland . Both systems include a wide range of retirement benefits for specific contingencies:

  • Old-age / early old-age pension;
  • Disability pension / rehabilitation subsidy;
  • Individual early retirement pension (for persons born before 1944)
  • Unemployment pension (for persons born before 1950)

In addition, the earnings-related pension system has provisions for partial disability and part-time pensions. Self-employed farmers are further covered by a number of separate retirement provisions. Other benefits similar to pensions include certain regularly paid compensations, e.g. statutory compensations paid under the Accident Insurance, Motor Insurance, and Military Injuries Acts.
KELA is responsible for the National Pension Insurance, which in addition to the national old-age, disability and unemployment pensions provides child increases, pensioners' housing and care allowances and regular and additional front-veterans' supplements.

In general, applications for earnings-related pensions and KELA pensions can be filed on a single form.  KELA receives an estimate from the private-sector earnings-related pension providers regarding the amount of earnings-related pensions payable which can be used to determine whether there is any chance of getting a national pension. KELA's decision on national pension is not issued until the amounts of any earnings-related pensions or other relevant compensations have been determined. Pensioners' care allowance, housing allowance and child increase are claimed on separate forms.

If a person has become entitled to a pension before applying for it, the pension or part of it can be paid retroactively for up to 12 months (for up to six months if unemployment pension). Individual early retirement pension is granted from the beginning of the month following the date on which the applicant sought a preliminary decision or applied for the pension. Whether the decision is to grant or to deny a pension, a written decision is sent to each claimant.

Amount of the National Pension

The amount of national pension payable is determined by the recipient's own employment-based pensions, spouse's pensions and other regular payments equivalent to a pension. If the total amount of these pensions and compensations exceeds a specified limit, the national pension is decreased or, at a certain cut-off point, reduced to zero.
The national pension is paid at a reduced or increased rate in the following situations:

  • early old-age pension is reduced by 0.4% for each month by which retirement is brought forward from the standard age of 65;

  • if the recipient has lived outside Finland , pension is reduced as a result of adjustment to the length of the recipient's total residence in Finland ;

  • Increased by 0.6% for each month by which retirement is postponed past the age of 65.

The amount of the national pension also depends on the recipient's family circumstances. The full pension for single recipients is larger than that for married or cohabiting recipients. If a recipient and his or her spouse separate, the national pension can be recalculated to reflect the recipient's status. Further, the amount of the national pension depends on the cost-of-living classification of the municipality in which the recipient lives. In calculating the amount of the national pension, the following types of benefits regularly received by the pensioner are taken into account:

  • earnings-related pensions, pensions based on self-employment, pensions based on foster care or care of a family member which the recipient has undertaken on the basis of a contractual arrangement;

  • employment accident pensions, survivors' pensions, annuities and assistance pensions paid on the basis of statutory employment accident insurance;

  • disability pensions, survivors' pensions and compensations for lost earnings paid on the basis of motor insurance laws;

  • various benefits paid under the Military Injuries Act;

  • The amount of change-of-generations pensions payable under the Farmers' Pensions Act and the basic amounts of farm closure pensions and compensations.

  • earnings-related pensions based on a contingency that occurred before 1 July 1975 as well as benefits paid in accordance with the Military Injuries Act since before 1 January 1983 are, for purposes of calculating the additional amount, considered up to a specified maximum amount only.

With the following benefits only some of their amount is taken into account:  assistance pensions, earnings-related pensions based on a contingency which occurred on 1 July 1975 or earlier, and age addition or increase for dependants accompanying an annuity paid since 1 January 1983 or thereafter under the Military Injuries Act. Earnings-related pensions accrued since 1 January 2005 are taken into account only to the extent that they were accrued before the pensioner reached the age of 63 years. Any increases for child care or study are not taken into account at all. Comparable foreign pensions and compensations are taken into account, with the exception of pensions from EU and EEA countries or from Switzerland based on the recipient's own residence or insurance.

Earnings-related pension insurance

Earnings-related pensions can be based on both public and private sector employment relationships as well as on self-employment, in any combination. All employees and self-employed persons are covered under statutory earnings-related pension insurance and are entitled to a pension under the earnings-related pension Acts under which they have been insured.

The Finnish Centre for Pensions (Eläketurvakeskus) and individual pension providers maintain a joint system tracking the pensionable earnings of persons covered by the Employees' Pensions Act (TyEL) and its predecessor acts (TEL, LEL, TaEL), the Seamen's Pensions Act (MEL), the Farmers' Pensions Act (MYEL) and the Self-Employed Persons' Pensions Act (YEL). The system also keeps track of the pension entitlements of public-sector employees (state, municipalities, parishes and certain other entities under public law).

A person's total pension cover may also include pension entitlements from times when he or she was employed outside Finland .  EU/EEA provisions concerning pension insurance are applicable to employees and self-employed persons moving within the EU as well as to their family members. They have no relevance for Finnish claimants unless they have been employed in some other EU or EEA country or in Switzerland . Earnings-related pensions can be paid from non-EU countries as well. The amount of earnings-related pension depends on both the amount of earnings and the length of employment. One can choose to retire on an old-age pension between the ages of 63 and 68 years.  Part-time pension payable under the legislation on earnings-related pensions is available for employees aged 58 or over who are making a transition from full-time to part-time employment, provided that they do not at the same time receive other statutory individual pensions.

Since the beginning of 2005, pension is based on all career earnings from the age of 18 and on specific periods without pay.  Before 1 January 2005, pensionable earnings were determined on the basis of the pay during the last 10 years in each employment relationship, but are now based on all career earnings. Pensions for self-employed persons and pensions for temporary employees (governed by the LEL Act) are based on career earnings. Until 1 January 2005, the total sum of earnings-related pensions payable to an individual pensioner was limited by rules which capped the total pension at a certain amount. Since 1 January 2005, these rules no longer apply.

Useful Addresses

The Social Insurance Institution of Finland (KELA)

Finnish Center for Pensions

Survivor's Benefits

Update 20/05/2008


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