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: Partial 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.
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.
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%.
| 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.
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 | |
|---|---|
| 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 % |