Pension reform took place in 2017 which gradually rises retirement age, standardizes pension contributions and pension accrual and introduces new pension options.
This guide goes through what the pension reform contains and how it affects pension accumulation.the changes that concern salary payment.
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What does the pension reform contain
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The most visible changes for employer and employee are the changed pension contribution. You can read more about them below. Pension contribution rates are unified for employees and for entrepreneurs.
Changes that don't affect salary payment
- Pension accrual rates are standardized. Employee's pension accrual will accumulate according to the employee's whole salary. (Does not affect salary payments or salary deductions)
- Retirement age will gradually rise to 65 and will be tied to life expectancy coefficient in 2030. (Does not affect salary payments or salary deductions)
- New pension options are introduced: Pension reform and Pension reformPartial old-age pension and Years-of-service pension.
- An increment for deferred retirement is introduced. Working after the earliest eligibility age for old-age pension increases pension accrual rate.
- A target retirement age will be determined for each age group.
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| Source: http://www.elakeuudistus.fi/ |
Pension contributions
Employee contribution
Contribution rate is the same for everyone from the age of 17. Employee contribution rates change along with the pension reform and they depend on the employee's age. The new pension contribution rates are visible on the table below. The future goal is to unify the contribution rates for everyone and that will be done after the transition period in the year 2025.
Employee’s pension contribution is included in the total contribution. The employer withholds the contribution from employee's salary.
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| The pension reform includes a transition period 2017-2025 and during that period all people aged from 53 to 62 have 1,5 percent higher contribution rate. Also their pension accrual rate is 1,7 % instead of 1,5%. |
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Employee contribution percent | |||||||
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| Age | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| 17–52 years | 7,15 % | 7,15 % | 7,15 % | 6,75 % | 6,35 % | 6,15 % | 5,70 % |
| 53–62 years | 8,65 % | 8,65 % | 8,65 % | 8,25 % | 7,85 % | 7,65 % | 7,20 % |
| 63–67 years | 7,15 % | 7,15 % | 7,15 % | 6,75 % | 6,35 % | 6,15 % | 7,20 % |
Contribution as an entrepreneur
The YEL insurance payments are standardized so that it will be the same for everyone changed also. The new YEL insurance rates are visible on the table below. The future goal is to unify the YEL payment rates for everyone and that will be done after the transition period in the year 2025.
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| The pension reform includes a transition period 2017-2025 and during that period all people aged from 53 to 62 have 1,5 percent higher contribution rate. Also their pension accrual rate is 1,7 % instead of 1,5%. |
| YEL payment percentages | |||||||
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| Age | |||||||
| 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | |
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| 18–52 years | 24,10 % | 24,10 % | 24,10 % | 24,10 % | 24,10 % | 24,10 % | 23,60 % |
| 53–62 years | 25,60 % | 25,60 % | 25,60 % | 25,60 % | 25,60 % | 25,60 % | 25,10 % |
63–67 years | 24,10 % | 24,10 % | 24,10 % | 24,10 % | 24,10 % | 24,10 % | 25,10 % |
| Starting entrepreneur (22 % reduction) | |||||||
| 18–52 years | 18,80 % | ||||||
| 18,80 % | 18,80 % | 18,80 % | 18,80 % |
Pension accrual
As of the year 2017 Pension accrual is standardized and pension will accrue from the whole salary. Pension will accrue from the age of 17 (18 for entrepreneurs) so that everyone will have an accrual rate of 1,5 %.
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| The years 2017-2025 are a transition period and during that period people that are 53-62 years old, will have an accrual rate of 1,7 %. Pension accrual doesn't affect salary payment. |
| 18,80 % | 18,408 % | ||||||
| 53–62 years | 19,97 % | 19,97 % | 19,97 % | 19,97 % | 19,97 % | 19,97 % | 19,578 % |
| 63–67 years |
| 18, |
| 80 % |
Retirement age
The general retirement age will rise gradually from the current 63 years by three months per year, until it reaches 65 years. The retirement age will concern people that are born in the year 1955 or after and who will turn 62 after the year 2017. Retirement age is increased by three months per year and will have an effect at first to those who are born in the year 1955. Their retirement age will be 63 years and three months. The retirement age will increase after that by three months per year so people born in the year 1956 will have retirement age of 63 years and six months. Retirement age will be rised until the general retirement age will reach 65 years. If an employee has been retired before the year 2017, the reform will not affect him or her.
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| The retirement age rise affects only upcoming pensions, so pensions which are already earned or which are already being paid will not change. The rise of retirement age doesn't affect salary payment. |
New pension options
Partial old-age pension
Partial old-age pension replaces the earlier part-time pension. You can draw parts of your old-age pension before reaching your general retirement age, regardless of whether you continue, reduce or stop working. In 2017, you can draw parts of your old-age pension as of age 61. You can draw a quarter (25%) or half (50%) of your accrued pension. If you draw a part of your pension before your general retirement age, that part will be reduced by 0.4 per cent for each month left until your general retirement age.
Years-of-service pension
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| 18,80 % | 18,80 % | 18,80 % | 18,80 % | 18,80 % | 19,578% |