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The earnings-related pension a part of social insurance


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The earnings-related pension a part of social insurance

  1. 1. The earnings-related pension a part of social insurance Taina Hedman 7.9.2013
  2. 2. earning-related pension that accrues from work Finnish Centre for Pensions2  Central body for the earnings-related pension scheme over 50 years in Finland  Provides services common to the decentralised earnings-related pension scheme  Carries out research, collects statistics, follow-up of reforms, keeps register over employment relationships  House who knows pensions
  3. 3. Finnish Centre for Pensions 3 Health insurance Accident insurance National pension Guarantee pension Pension insurance Other (e.g. voluntary supplementary pensions) Unemployment insurance Employees’ group life insurance Earnings-related pension Social Insurance
  4. 4. • Earnings-related pension – Secures a reasonable consumption level after retirement – Right to pension earned through work – Benefit paid by earnings- related pension institutions – No pension ceiling Finnish Statutory Pension Provision • National pension and guarantee pension – Secures a minimum level of income – Supplements a small earnings-related pension – Amount depends on time of residence in Finland and family relations – Benefit paid by the Social Insurance Institution of Finland (Kela) Total pension = Guarantee pension + National pension + Earnings-related pension
  5. 5. Total pension in 2013 0 250 500 750 1000 1250 1500 1750 0 500 1000 1500 2000 2500 3000 3500 Pension EUR/month Wage EUR/month Guarantee pension National pension Earnings-related pension Net
  6. 6. Earnings-related pension accrues from working! The Finnish Centre for Pensions6  The earnings-related pension is a central part of Finnish social security.  The earnings-related pension ensures that employees and the self-employed can maintain their standard of living after retirement.  The longer your working career, the better your pension!  The residence-based national pension and the guarantee pension secure a minimum income.  Together, the earnings-related and the national pension ensure the wellbeing in case of disability and old age.
  7. 7. Earnings-related pension Contributions Finnish Centre for Pensions7  Employers and employees pay their share of the pension contribution  Employer withholds employee’s share of the contribution from wages and pays the entire contribution to the pension provider  Earnings-related pension contributions are fully deductible in the taxation for employees
  8. 8. Earnings-related pension Contributions Finnish Centre for Pensions8  Contribution percentages are affirmed annually by the Ministry of Social Affairs and Health Employer with insurance contract 23.4% when payroll < EUR 1,879,500 Contribution category model when payroll > EUR 1,879,500 Occasional employer 23.8% Employee’s share 5.15% < 53 yrs 6,50% ≥ 53 yrs
  9. 9. Determining the Earnings-related Pension Finnish Centre for Pensions9  Old-age pension accrues as of age 18  Pension accrual rates: 18–52 yrs: 1.5% 53–62 yrs: 1.9% 63–67 yrs: 4.5%  Also on the basis of social benefits determined by law, for periods of home care of child under the age of three and for periods of study  Earnings adjusted by wage coefficient in line with the level at the start of the pension  Proportioned to life expectancy by means of life expectancy coefficient Earnings- related pension = annual earnings X accrual rate
  10. 10. When and on which pension? The Finnish Centre for Pensions • Retirement due to illness at age 18 – 62 – Vocational rehabilitation (for those in working life) – Cash rehabilitation benefit – Disability pension • Flexibly on old-age pension according to own choice at age 63-68. • An elderly employee or self-employed person may reduce his or her workload by retiring on a part-time pension. • Survivors’ pension secures the income of the surviving spouse and children if the family’s breadwinner dies
  11. 11. How Pension Accrues • Pension accrues from all wages earned between the ages of 18 – 68 years • Pensions accrues also for studies and for staying at home with one’s own child under the age of 3 • Working abroad: according to the rules of the country of employment Illustration: Anssi Keränen ANNUAL EARNINGS X ACCRUAL RATE
  12. 12. Funding of Earnings-related Pensions • Everyone is first a payer, then a receiver • Part of the contribution is funded for future generations Illustration: Anssi Keränen Pension recipient EUR 20.5 bn + public sector Employee Employer / Self-employed EUR 21.5 bn Earnings-related pension insurer EUR 155 bn
  13. 13. Is There Enough Money? • The number of retired persons grows and people live longer • Working lives have to be extended to maintain a reasonable contribution level • Returns on earnings-related pension funds are of great significance Illustration: Anssi Keränen OLD-AGE DEPENDENCY RATIO OLD-AGE DEPENDENCY RATIO
  14. 14. Check How Much Pension You Have Earned! • You can access your Pension Record online (only in Finnish and Swedish) at or receive a printed record to your home address every third year Illustration: Anssi Keränen
  15. 15. Sources of Information • • • • Finnish Centre for Pensions customer information 029 411 2801 switchboard 029 411 20 e-mail visiting address Kirjurinkatu 3 postal address FI-00065 ELÄKETURVAKESKUS Finland Eläketurvakeskus 15