Overview of Finnish Earnings-Related Pension System
Explore key information and figures of the Finnish earnings-related pension system through a detailed slideshow. Gain insights into the governance, social security insurance, pension provisions, execution structure, and the process of preparing and implementing pension acts in Finland. The visuals and notes pages provide a comprehensive overview of how the system functions.
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Earnings-related Pension System in Graphs and Figures The slideshow includes key information of the Finnish earnings-related pension system. The notes pages of the slides include additional information and links to sources. 30.6.2023
Social security insurance in 2021 43 bnEUR Employees group life Insurance 0.04 bnEUR Health Insurance 4.1 bnEUR Workers Compensation Insurance 0.5 bnEUR Unemployment Insurance 4.6 bnEUR Pension Insurance 33.8 bnEUR Earnings-related pension 30.3 bnEUR National pension 2.5 bnEUR Other 1,0 bnEUR | 3
Basic pension provision TY EL KE Earnings-related pension Maintains the attained income level to a reasonable degree National pension KANSANEL KE JA TAKUUEL KE and guarantee pension KOKONAIS- EL KETOTAL PENSION V himm is- toimeentulon turvaaminen Guarantee a minimum income | 5
Execution in Earnings-related Pension System Ministry of Social Affairs and Health Ministry of Finance Financial Supervisory Authority Finnish Centre for Pensions Pension insurance companies TyEL, YEL (4) The Farmers' Social Insurance Institution MYEL Keva JuEL Company pension funds TyEL (8) Industry-wide pension funds TyEL, YEL (4) Seafarers Pension Fund MEL Other public partie Insured and policyholders | 7
Preparation and coming into force of earnings-related pension acts STM prepares a bill Result of the negotiations Employers Employees Parlament debates the bill The self- employed The Finnish pension Alliance TELA Authorised pension providers STM ETK The Ministry of Social Affairs and Health The Finnish Centre for Pensions The president ratifies the bill | 8
Basic pension provision TY EL KE Earnings-related pension Maintains the attained income level to a reasonable degree National pension KANSANEL KE JA TAKUUEL KE and guarantee pension KOKONAIS- EL KETOTAL PENSION V himm is- toimeentulon turvaaminen Guarantee a minimum income | 10
Pension accrues from work As of the beginning of 2017 Life Earnings- related pension ELINAIKA- KERROIN TY ANSIOT Annual earnings Accrual rate expectancy coefficient Pension accrues at a rate of 1.5% of the gross annual wages For those aged 53 62 years: at a rate of 1.7% of the gross annual wages until the end of 2025 (accrual during transition period). If the pension is taken after reaching the retirement age, the pension will be increased by 0.4% per month. | 13
Retirement age rises by birth group Year of birth Retirement age Age when insurance obligation and pension accrual end 1954 63 years 68 1955 63 years 3 months 68 1956 63 years 6 months 68 1957 63 years 9 months 68 1958 64 years 69 1959 64 years 3 months 69 1960 64 years 6 months 69 1961 64 years 9 months 69 1962 1964 65 years 70 | 14
Age limits of earnings-related pension benefits Benefit Year of birth Right to pension in age Old-age pension As of age group s retirement age Partial old-age pension 1949 1963 61 1964 62 1965 3 years before reaching the retirement age (follows life expectancy) Disability pension (full or partial) 17 age group s retirement age Years-of-service pension 1955 1964 63 age group s retirement age 1965 2 years before reaching the retirement age (follows life expectancy) Survivor s pension 0 18 - Child No age limit - Surviving spouse, if children 50 - Surviving spouse, no children Vocational rehabilitation 17 age group s retirement age | 15
Index adjustments secure pension level The earnings are adjusted with the wage coefficient to the level of the starting moment of the pension. Earnings-related pensions in payment are adjusted annually with the earnings-related pension index. National pensions in payment are adjusted annually by Kela with the national pension index. Index 2019 2020 2021 2022 2023 Wage coefficient 1.9% 2.0% 1.3% 2.5% 3.8% Earnings-related pension index 1.5% 1.2% 0.5% 2.3% 6.8% National pension index 0.0% 1.0% 0.4% 2.1% 7.8% | 16
Average total pension on 31 Dec. 2022 Men Women All Average total pension EUR/month 2,070 1,658 1,845 - Earnings-related pension component 1,933 1,502 1,698 - National pension component 117 143 132 - Special protection pension component* 20 12 16 Number of pension recipients 687,000 828,000 1,515,000 *Occupational Accidents, Injuries and Diseases Act, Motor Liability Insurance Act, Act on Compensation for Military Accidents and Service-Related Illnesses, Act on Compensation for Accidents and Service- Related Illnesses in Crisis Management Duties and the Compensation for Military Injuries Act. | 18
Distribution of total pension received in ones own right of persons residing in Finland 31 Dec. 2022 | 19
Average total pension and its ratio to average earnings in 2000 2022 | 20
Average total pension relative to average earnings in 2015 2085, % | 21
Earnings-related and Kela pension expenditure in 2022 *Includes the guarantee pensions (273 mill. EUR) and the front-veterans supplements and the child increases (11 mill. EUR) paid by Kela. | 23
Statutory total pension expenditure in 2015 2022, mEUR 2015 2016 2017 2018 2019 2020 2021 2022* Earnings-related pensions 25,265 26,035 27,034 27,865 28,858 29,671 30,309 31,400 - Private sector 15,944 16,442 17,086 17,619 18,246 18,751 19,142 19,830 - Public sector 9,321 9,593 9,947 10,246 10,612 10,920 11,167 11,570 Kela s pensions 2,503 2,470 2,391 2,357 2,324 2,515 2,461 2,477 Special protection pensions** 501 494 472 462 455 448 437 .. Total pension expenditure 28,269 28,999 29,897 30,684 31,637 32,634 33,207 34,933 * Preliminary data ** Occupational Accidents, Injuries and Diseases Act, Motor Liability Insurance Act, Act on Compensation for Military Accidents and Service-Related Illnesses, Act on Compensation for Accidents and Service- Related Illnesses in Crisis Management Duties and the Compensation for Military Injuries Act. | 24
Pension expenditure, per cent of GDP in 2010 2090 | 25
Pension expenditure and contribution rates in proportion to the wage sum under the Employees Pensions Act (TyEL) in 1962 2090 | 26
Insured for Earnings-related Pension Benefits 5
Distribution of population in terms of work and earnings-related pension per 31 Dec. 2021 | 28
Insured persons in employment or self employment on 31 Dec. 2021, by pension act | 29
Pension recipients by pension structure in 2001 2022 | 32
Total population and pension recipients on 31 Dec. 2022 | 33
Recipients of disability pension by main disease category in 2012 2022 | 34
7 Retirees on Earnings-related Pensions and Effective Retirement Age
New retirees on earnings-related pension in 2000 2022, by pension benefit | 36
New retirees on an earnings-related disability pension in 2000 2022, by main disease category | 37
New retirees on an earnings-related pension in 20002022, by age group | 38
New retirees on an earnings-related pension in 2022, aged 50 68 | 39
Effective retirement age in earnings-related pension scheme in 2000 2020 | 40
Expected effective retirement age in earnings-related pension scheme in 1996 2020 | 41
Expected effective retirement age in 19962050: realization, target and projection | 42
Rehabilitation within the Earnings-related Pension Scheme 8
Continuing at work, employees ending rehabilitation in 2017 | 47
Financing of Earnings-related Pensions 9
Financing of pensions, by pension act The Finnish statutory pension provision is financed mainly with earnings-related pension contributions paid by employers, employees, self-employed persons and farmers, as well as a with accrued pension assets and investment returns. Parts of some of the pensions are financed with state payments and contributions paid by the Employment Fund to the earnings-related pension scheme. State funds are used to finance the expenses of VEKL benefits relating to the care of one s own child under the age of three or to studying, as well as relating management expenses. | 49
Money flows of earnings-related pension scheme 2022 | 50
