Pension insurance

The traditional international classification divides pension provision into three pillars.

First pillar pensions are statutory pensions. In Finland, such pensions are the national and the earnings-related pensions.

Second-pillar pensions are collective industry- or employer-specific pension schemes. In Finland, such schemes include group pension insurance arranged by the employer.

Third-pillar pensions are private, voluntary pensions. In Finland, they may be individual pensions or long-term saving accounts. People may prepare for their retirement also by saving in other ways.

The significance of supplementary pensions increases if the income in retirement would be low otherwise due to, for instance, long periods of study, unemployment or child care. In addition to raising the level of income in retirement, voluntary supplementary pension provision sometimes offers the possibility to retire before reaching the retirement age.

Contrary to the case in many other countries, the role of third-pillar supplementary pensions is not very significant in Finland. Statutory pensions are broad in scope, and neither the pensionable earnings nor the pension amount have a ceiling.

Earnings-related pension insurance is managed by authorised pension providers, and the employer’s obligations are set out in legislation. The earnings-related pension scheme covers nearly the entire population. Employers and employees may also pay voluntary supplementary pension contributions to enhance statutory pension coverage.

The earnings-related pension system is one of the key pillars of the Finnish welfare state. It ensures continuity of livelihood when employment income ends due to old age, disability or the death of a family provider. In the private sector, pensions are managed by pension insurance companies, pension foundations and pension funds. In the public sector – including municipalities, the state, the church, Kela personnel, the Bank of Finland and wellbeing services counties – pensions are managed by Keva.

Pension providers collect contributions as well as information on employees and entrepreneurs, manage pension funds and the investment of their assets, grant pensions and pay them out.

In the private sector, pension coverage for employers, employees and entrepreneurs is provided by competing private pension institutions. Employers or entrepreneurs may choose their pension provider freely. Some employers and sectors have established their own pension foundations or funds, such as the Finnish Broadcasting Corporation’s Pension Fund and Valio Pension Fund. Statutory pension coverage may be supplemented with voluntary pension arrangements offered by life insurance companies operating in Finland.

As of 2025, the following pension insurance companies operate in Finland:

• Veritas Pension Insurance Company Ltd
• Ilmarinen Mutual Pension Insurance Company
• Elo Mutual Pension Insurance Company
• Varma Mutual Pension Insurance Company

Employers must take out statutory pension insurance for their employees. Work performed under an employment relationship must be insured in accordance with pension legislation. There are five pension acts governing this.

Pension acts for the private sector:

• Employees Pensions Act (TyEL)
• Self-Employed Persons’ Pensions Act (YEL)
• Farmers’ Pensions Act (MYEL)
• Seafarers’ Pensions Act (MEL)

There are no provider-specific differences in the content of TyEL and YEL pension coverage.

Pension coverage for the public sector is governed by the Public Sector Pensions Act (JuEL).

Individuals holding the highest public offices – such as Members of Parliament and the President of the Republic – have their own pension acts. Employees of the Orthodox Church and the Government of Åland are covered by separate pension provisions.

In addition to these, pensions are paid based on the Motor Liability Insurance Act, the Workers’ Compensation Act, the Act on Compensation for Military Accidents and Service-Related Illnesses and the Act on Compensation for Accidents and Service-Related Illnesses in Crisis Management Duties.

Statutory pension insurance for employees – TyEL

Employment relationships in the private sector are insured under the Employees Pensions Act (TyEL) if the following conditions are met:

• The work is performed under an employment contract
• The employee is aged between 17 and 68
• Monthly earnings from the same employer amount to at least €70.08 (in 2025)

An employer is considered a contract employer if they have at least one permanent employee or if the total wages paid over a six-month period exceed a specific threshold. This threshold is reviewed annually and was €9,822 in 2024. If these conditions are not met, the employer is considered a temporary employer.

A contract employer must conclude a TyEL insurance contract with a chosen pension provider. A temporary employer is not required to take out TyEL insurance, but may still arrange pension coverage without a contract by paying monthly contributions directly to the selected pension insurance company. Contributions must be paid by the end of the month following the wage payment.

TyEL insurance must be taken out within one month of the first wage payment. The employer is responsible for arranging the insurance and reporting the employee’s earnings. The employee’s nationality does not affect TyEL coverage: work performed in Finland is generally insured in Finland.

Example: If the first wage payment is made on 15 January, TyEL insurance must be arranged by 31 February.

The pension contribution rate of a contract employer depends on the size of the employer and the customer rebate paid by the pension insurance company. The average contribution rate is 24.4% (2025). For large employers, the rate is also affected by disability pensions granted to their employees.

Contract employers may report employee earnings either on a monthly basis or once a year in January. Employers using annual reporting estimate the total annual wages and pay contributions in advance. The final contribution is calculated the next spring, based on actual earnings. Employers using monthly reporting declare actual earnings each month and pay contributions accordingly. Temporary employers must report earnings and pay the final contribution by the end of the month following the wage payment.

Although employers pay the full pension contribution, employees also contribute to their pension coverage. Contributions are fully tax-deductible.

Employees’ pension contribution rates in 2025:

• Aged 17–52: 7.15%
• Aged 53–62: 8.65%
• Aged 63 and over: 7.15%

Note: Contribution tiers will be abolished from the beginning of 2026. The rate will be 7.3% for all employees.

Statutory pension insurance for entrepreneurs – YEL

Entrepreneurs must take out pension insurance under the Self-Employed Persons’ Pensions Act (YEL) from a chosen pension provider for the duration of their business activity. Farmers, reindeer herders, fishers, forest owners and recipients of scientific or artistic grants and scholarships are covered under the Farmers’ Pensions Act (MYEL). These insurances are mandatory and cannot be replaced by voluntary pension insurance.

YEL and MYEL insurance provides cover for old age, unemployment and death and thereby can secure the livelihood of self-employed persons and their families in the event of various risks. The statutory insurances provide protection even before retirement age. Entrepreneurs receive old-age pension, partial pension and disability pension based on their confirmed YEL income.

The YEL contribution rate is the same across all pension insurance companies. It is determined annually by the Ministry of Social Affairs and Health. Contributions are fully tax-deductible.

YEL income and contribution

YEL income refers to the estimated monetary value of a self-employed person’s work. It should correspond to the wage that would be paid to a worker who carries out the same work with the same professional competence. The estimate is made by the entrepreneur’s pension provider based on the median wage of the field of business, the value and amount of the work input, the scope of business activity and the entrepreneur’s professional skills. Confirmed YEL income also determines the YEL contribution, which is fully tax-deductible.

• Under 53 years: 24.10%
• Over 53 years: 25.60%
• Aged 63–67: 24.10%

Note: Contribution tiers will be abolished from the beginning of 2026.

Discount for new entrepreneurs:

• Aged 18–52: 18.80%
• Aged 53–62: 19.97%
• Aged 63–67: 18.80%

Impact of YEL income

YEL income forms the basis of a self-employed person’s social security: confirmed YEL income affects their amount of pension, sickness allowances and compensation based on voluntary occupational accidents and diseases insurance. YEL income also affects the amount of the entrepreneur’s unemployment allowance and their daily allowances for parents. YEL insurance thus secures the livelihood of the self-employed person and their family also during active working life, not only in retirement.

Voluntary pensions

Statutory pension coverage may be supplemented with voluntary pensions. Employers may enhance their own and their employees’ pension coverage or can use voluntary pensions to motivate, reward and retain employees. Private individuals may also take out voluntary pension insurance to improve their pension amount. Voluntary pension products are in Finland provided and managed by life insurance companies.

Types of voluntary pension insurance

Voluntary pension insurance can be divided based on the number of insured persons: individual pension insurance is taken out for one person, and group pension insurance covers at least two persons.

Private individuals can also accrue pension savings by investing cash, shares or fund units in a long-term savings account.

Individual pension insurance

Individual pension insurance is a good solution for improving the pension coverage of a single person. The individual pension insurance may be taken out by the insured person or by the insured person’s spouse or employer. If the employer is the policyholder, the insured may not pay contributions to the insurance. Tax rules for individual pension insurance taken out by private individuals are stricter than those for insurance taken out by companies. Since the 2017 pension reform, the age limit for voluntary pension insurance has been the same as the pensionable age for statutory old-age pension.

Group pension insurance

Companies can also insure their employees with group pension insurance. For tax purposes, the insurance must be collective, which means the employees included in the insurance are selected based on, for example, work task or professional position, or that the insurance covers all employees. The employer can deduct supplementary pension contributions in taxation.

Summary

Complementary systems to basic social security require employment. These include the earnings-related pension system, the occupational accident insurance system and unemployment funds.

Pension providers collect statutory contributions and necessary data, manage funds and investments, grant pensions and pay them out.

Statutory pension insurance is governed by pensions acts.

Entrepreneurs must take out pension insurance under the Self-Employed Persons’ Pensions Act or the Farmers’ Pensions Act. These insurances are mandatory and cannot be replaced by voluntary insurance. They offer protection even before retirement age.

Statutory pension coverage may be supplemented with voluntary pensions. These may be acquired personally or used by employers to motivate, reward and retain employees.

Glossary

• Basic security: The protection provided by the social security system, to which all Finnish residents are entitled. Includes sickness and maternity benefits, pension coverage, unemployment benefits and family allowances.
• TyEL: Employees Pensions Act – applies to all private sector employment relationships unless a separate pension act is followed.
• YEL: Self-Employed Persons’ Pensions Act.
• MYEL: Farmers’ Pensions Act.
• Contract employer and temporary employer: Under TyEL, employers are considered contract employers if they have at least one permanent employee or if wages paid over six months exceed a certain threshold.