Pension reform took place in 2017 which gradually rises retirement age, standardizes pension accrual and introduces new pension options.
This guide goes through what the pension reform contains and how it affects pension accumulation.
What does the pension reform contain
- Employees' pension contribution changes are introduced. Contribution is from now on same for everyone and contribution for entrepreneurs will be more unified.
- 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 reform.
- 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.
Pension contributions
Employee contribution
Contribution rate is the same for everyone from the age of 17.
Employee’s pension contribution is included in the total contribution. The employer withholds the contribution from employee's salary.
| Age | Employee contribution percent |
|---|---|
| 17–52 years | 6,15 % |
| 53–62 years | 7,65 % |
| 63–67 years | 6,15 % |
Contribution as an entrepreneur
The YEL insurance payments are standardized so that it will be the same for everyone after the transition period.
| YEL payment percentages | |
|---|---|
| Age | YEL payment |
| 18–52 years | 24,10 % |
| 53–62 years | 25,60 % |
63–67 years | 24,10 % |
| Starting entrepreneur (22 % reduction) | |
| 18–52 years | 18,80 % |
| 53–62 years | 19,97 % |
| 63–67 years | 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 %.
| Age | Pension accrual rate |
|---|---|
| 17–52 years | 1,5 % |
| 53–62 years | 1,7 % |
| 63–67 years | 1,5 % |
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.
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
If you have had a strenuous and long working life, you may be able to retire already at age 63. If your working capacity has diminished and your work has been strenuous and wearing for 38 years, you can apply for a years-of-service pension.