Earnings-related Pensions for Employers and the Self-employed

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1 2016 Earnings-related Pensions for Employers and the Self-employed How do I arrange insurance? how much does IT cost? Finnish Centre for Pensions ELÄKETURVAKESKUS

2 Finnish Centre for Pensions Service centre for the Finnish statutory earnings-related scheme Customer service and visiting address: Kirjurinkatu 3, Itä-Pasila, Helsinki Postal address: FI ELÄKETURVAKESKUS, Finland Telephone: Pensions advice: International matters: Insurance for work abroad: Information for the self-employed: Fax: Booklets published by the Finnish Centre for Pensions Earnings-related Pensions for Employers and the Self-employed (in Finnish, Swedish and English) Pension Provision for Employees and the Self-employed (in Finnish, Swedish and English) Applying for Pension from Abroad (in Finnish, Swedish, English, Russian and Estonian) The booklets are free of charge and available from the Finnish Centre for Pensions, the Social Insurance Institution of Finland (Kela), Employment and Economic Development Offices and the Centre for Economic Development, Transport and the Environment.

3 Introduction 4 Earnings-related insurance covers all wage labour 4 Employees Pensions Act 4 Pension insurance for your employees 5 Employer with an insurance contract 5 Occasional employer 6 Private household as employer 6 Pension contributions paid for employees 6 Pension insurance for the self-employed 7 Self-employed Persons Pensions Act 7 Take out your own insurance 7 Pension contribution 8 Pension based on earnings 8 Insurance for different company forms 9 Who counts as a family member? 10 Flexible contribution 10 Discount on insurance contribution for the newly self-employed 11 Unpaid insurance contributions 11 Pension provision of grant recipients 12 Pension insurance for foreign employees 12 Employees from an EU/EEA country, Switzerland or a social security agreement country 12 Possibility of exemption for employees from non-agreement countries 13 Insurance for posted employees 13 Working in an EU/EEA country, Switzerland or a social security agreement country 14 Working in a country where neither EU regulations nor social security agreements apply 14 Salary for insurance purposes for work abroad 15 Shortcut to information 16 Supplement 19

4 4 Earnings-related Pension Provision for Employers and the Self-employed 2016 Introduction If you want to know more about how to arrange insurance for private-sector employees or the self-employed, this booklet is for you. It contains instructions on your obligations as an employer to arrange insurance for your employees. If you are self-employed, this booklet tells you how to arrange your own provision. This booklet follows currently valid legislation under the Employees Pensions Act and the Self- Employed Persons Pensions Act. However, this booklet should not be considered a legal text. More detailed information about insurance is available from the Finnish Centre for Pensions or the earnings-related providers, as well as online at For more information on the forthcoming reform that will take effect in 2017, please go to the reform website (http://www.elakeuudistus.fi/ briefly-in-english), maintained by the Finnish Centre for Pensions. This booklet also contains information on insurance for foreign employees working in Finland and Finnish employees posted abroad. The Supplement at the end contains information on insurance contributions, indexes and taxation in It also features tables on the national, the reduced surviving spouse s as well as social benefits for which accrues. All amounts in this booklet are in 2016 prices. Earnings-related insurance covers all wage labour If you work for a private-sector employer, your work is to be insured under the Employees Pensions Act. If you are a seafarer working on a ship that sails abroad, your work is to be insured with the Seafarers Pension Fund under the Seafarer s Pensions Act. If you are self-employed, your work is to be insured under the Selfemployed Persons Pensions Act. If you are a farmer, fisherman, reindeer herder or a researcher or artist working on a grant, you must insure your work with Mela under the Farmers Pensions Act. In addition to earnings-related insurance, your employer is also liable to pay your workers compensation contribution, unemployment insurance contribution, group life insurance premium as well as your social security contribution. Employees Pensions Act You are under obligation to take out insurance for your employee as of the beginning of the month follow-

5 Earnings-related Pension Provision for Employers and the Self-employed ing the month of his or her 18th birthday. Your liability ends at the end of the month during which your employee turns 68. You must also pay earnings-related contributions for any retired persons under the age of 68 that you have employed since they will accrue new for the work they do in retirement. The Employees Pensions Act covers work carried out by your employee under an employment contract if you pay your employee at least EUR per calendar month. The earnings include wages or other remuneration for work. Any remuneration for positions of trust that you pay must be insured under the Employees Pensions Act if the person receiving them is employed by you. In other cases, taking out insurance for positions of trust is voluntary. Pension insurance for your employees As an employer, you can arrange provision for your employees with any provider either as an employer with an insurance contract or as an occasional employer. Employer with an insurance contract If you continually employ at least one person, or if the salaries you pay exceed EUR 8,238 over a six-month period, you are an employer with an insurance contract. You will have to arrange provision for your employees within the month following the payment of their wages. You can take out insurance under the Employees Pensions Act with any insurance company, company fund or industry-wide fund. You may insure all of your employees with a single insurance. Alternatively, you may take out parallel insurance for different groups of employees, as stipulated by the insurance terms and conditions. As an employer with an insurance contract, you have to report the earnings of your employees to your provider either through an annual or a monthly notification. If you choose the annual notification, you will report the annual earnings for continuing employment contracts for the previous year to your provider by the end of January. However, on at least a quarterly basis, you have to report to your provider the earnings for employment contracts that have started and ended during the year. If you use the monthly notification, you will report your employees and their earnings to your provider on a monthly basis. In that case, you do not have to submit a separate annual notification.

6 6 Earnings-related Pension Provision for Employers and the Self-employed 2016 Occasional employer You are an occasional employer if you do not continually employ anyone and if the wages you pay out over a six-month period amount to less than EUR 8,238. Instead of signing a separate insurance contract with a provider, you will report your employees and their wages and pay the insurance contributions on a monthly basis to a provider of your own choice. The contributions have to be paid by the 20th of the month following the payment of the wages. Private household as employer If you hire, for instance, a renovator, a child-minder, a cleaner or a musician for family celebrations, your household is considered an employer and is under obligation to pay contributions. Your household has to pay contributions for wages paid to all persons aged 18 or above if the paid monthly wage exceeds EUR The duration of the employment contract is of no significance. You must also take out insurance for retired persons that you have employed who are less than 68 years of age, since they will accrue new for the work they do in retirement. The age limits relating to the insurance obligation are specified above in the section Employees Pensions Act. You have to ensure all your employees under the Employees Pensions Act. You may take out insurance with any insurance company. The insurance company you choose will give you advice on how to arrange insurance and, for example, whether the contributions must be paid according to the rules governing occasional employers or employers with an insurance contract. (Other statutory fees that an employer has to pay are presented at in Finnish and Swedish.) Pension contributions paid for employees Whether you are an employer with an insurance contract or an occasional employer, the basis for the contribution is the wage that you pay to your employee. If you are an employer with an insurance contract, the total wage bill will affect the bases of the contribution. The insurance contribution under the Employees Pensions Act is determined on the same grounds in all insurance companies. Both the employer and the employee pay an earnings-related insurance contribution. As the employer, you are responsible for paying the total insurance contribution to the provider. You have the right to deduct your employee s share of the insurance contribution from the employee s salary.

7 Earnings-related Pension Provision for Employers and the Self-employed As the employer, you will collect your employee s contribution from his or her gross salary, from which taxes are also withheld. The gross salary is the employee s salary to which any possible benefits in kind have been added, by taxable value. The right to deduct the earnings-related contribution in taxation has already been taken into account in the employee s withholding rate. If you have posted an employee to another country, his or her salary for insurance purposes is the basis for the contributions. The 2016 insurance contribution rates are listed in the Supplement at the end of this booklet. Pension insurance for the self-employed If you are self-employed, you have to arrange provision under the Self-employed Persons Pensions Act. If you are a farmer, fisherman or reindeer herder or a grant recipient, you must insure your work based on the Farmers Pensions Act. You also have to insure part-time self-employment. Moreover, if you are a foreign citizen living in Finland, you have to insure any selfemployment that you engage in here. Self-employed Persons Pensions Act According to the Self-employed Persons Pensions Act, a self-employed person carries out work generating an income in Finland and is not employed in the private or public sector when carrying out this work. Simply owning a company is not a basis for insurance in itself, as actual work is required. As self-employed, you have to take out insurance under the Selfemployed Persons Pensions Act if you are between 18 and 67 years of age your self-employment continues for an uninterrupted period of at least four months your earnings are at least the size stipulated by law (EUR 7,557.18/ year). You also have to insure self-employment that you do while receiving a cash rehabilitation benefit or a disability. Take out your own insurance If you are self-employed, you may freely choose with which provider you take out your insurance under the Self-employed Persons Pensions Act. If you are active in certain fields you may also take out your insurance under the Self-employed Persons Pensions Act with a fund within your own field.

8 8 Earnings-related Pension Provision for Employers and the Self-employed 2016 The insurance under the Selfemployed Persons Pensions Act is a personal insurance that covers all your self-employment. Even if you have several different businesses, you need only one insurance policy. The scope of your entire business activity is taken into account in your income under the Self-employed Persons Pensions Act. You must take out the insurance within six months after beginning self-employment. You can insure retroactively only the current year and three previous calendar years. If you have left earlier periods uninsured, you will accrue no for those periods. Pension contribution As self-employed, you are personally responsible for paying your insurance contributions under the Self-employed Persons Pensions Act. You may also be obligated to pay contributions under the same act for your family members. Also the company in which you work as a self-employed person is obligated to pay your contributions under the Self-employed Persons Pensions Act. If you are above 53 years, your contribution rate is higher than that of younger self-employed persons, but so is your accrual rate. For the first four years of your selfemployment, you will receive a discount on your insurance contribution under the Self-employed Persons Pensions Act. The insurance contribution that you are to pay under the Selfemployed Persons Pensions Act will be determined based on your confirmed income and an age-based insurance contribution rate. Your earnings will be adjusted annually with a wage coefficient. The insurance contributions under the Self-employed Persons Pensions Act are fully deductible in either your own or your spouse s taxation. If your company has paid your insurance contributions, you may deduct them in your company s taxation. The insurance contribution rates are listed in the Supplement at the end of this booklet. Pension based on earnings The provider will confirm your income under the Self-employed Persons Pensions Act based on your insurance application. The confirmed income forms the basis of both your accrued and your insurance contribution. If you fall ill, your sickness allowance will be determined based on your confirmed income. The parenthood allowance, special care allowance and rehabilitation allowance based on the Rehabilitation Allowance Act are also determined based on your confirmed income. As self-employed, you fall within the

9 Earnings-related Pension Provision for Employers and the Self-employed scope of unemployment security if your annual earnings are at least EUR 12,420. As of the beginning of 2016, the basis for the voluntary insurance for occupational accidents and diseases is your confirmed income under the Self-employed Persons Pensions Act. Your confirmed income should correspond to such a salary or compensation that an equally qualified outsider would receive if he or she were hired to do your work. Your income should correspond to the value of your work input. Your income is not determined based on the profit of your company or the reimbursement for capital investment that you have withdrawn from your company. You should evaluate your income correctly from the beginning, as corresponding to your real work input, since the confirmed income from work during your entire period as a self-employed person will affect the amount of your future. If your work input changes significantly in either direction, your confirmed income may and should be changed. Please note, however, that it is not possible to change your confirmed income retroactively. Your provider will help you assess your income. Insurance for different company forms In addition to entrepreneurs and persons practising a profession, the Selfemployed Persons Pensions Act also applies to you if you own the company through which business is conducted. However, simply owning a company is not in itself a basis for the insurance, since you also have to work for the company in order for the insurance under the Self-employed Persons Pensions Act to be obligatory. You are insured under the Self-employed Persons Pensions Act if you are: the holder of a private business name. Your spouse is also insured if he or she is working for your company a partner to a general partnership an active partner to a limited partnership a partner to a limited company in a senior position and you own alone more than 30 per cent of the company shares or more than 30 per cent of the voting rights based on the shares a partner to a limited company in a senior position and you own, together with family members, more than 50 per cent of the company shares or have, together with family members, the voting rights based on these shares.

10 10 Earnings-related Pension Provision for Employers and the Self-employed 2016 When calculating your share of ownership, your indirect ownership in other companies or corporations is also taken into account if you own alone or together with family members more than 50 per cent of this other company or corporation or use an equivalent share of authority in the other company or corporation. The Self-employed Persons Pensions Act does not apply if you are: the spouse or family member of the insured self-employed person and you work in a partnership without being a partner a silent partner of a limited partnership. Who counts as a family member? A family member is a person in a descending or ascending line who permanently resides in the household of the self-employed person. Adopted children or adopted parents and domestic partners living in the same household with the selfemployed person are also considered family members. Married spouses are considered family members even if they do not live in the same household. Parties to a registered relationship are comparable to married spouses. Siblings are not considered family members as defined by the Selfemployed Persons Pensions Act. Flexible contribution If you are self-employed, you may raise your provision during prosperous years by paying additional insurance contributions without increasing your confirmed income under the Self-employed Persons Pensions Act. Correspondingly, you may pay smaller contributions during less prosperous times. All you need to do is send a written notification to your provider. As a self-employed person, you can raise or lower your income with a flexible contribution payment once a year. The flexible contribution payment does not alter your confirmed income. You can alter your confirmed income can be altered with a separate application only, but not for a retroactive period. Your overall income for each year is determined based on your confirmed income and the raised or lowered contribution. You can increase your contribution by per cent of your calculated annual contribution based on your confirmed income. You can reduce your regular contribution by per cent. Note that reducing your contribution will also reduce your future. The flexibility option cannot be used if you have outstanding con-

11 Earnings-related Pension Provision for Employers and the Self-employed tributions. Nor can you use it during the discount period for beginning self-employment, or following the year in which you turn 62. Additional contributions or reduced contributions targeted at the calendar year before the start of a possible disability are not taken into account in the calculation of your disability. Temporary changes to your insurance contribution are not taken into account when calculating your halved income for a possible part-time. When determining your stabilised income for a part-time, the impact of additional contributions on your earnings for the year before your starts are not taken into account. For other years, all additional contributions that you have paid will be taken into account. The downward flexibility of the income is always taken into account when calculating your stabilised income. A raised or lowered insurance contribution does not affect the amount of sickness allowance that you receive based on your health insurance. The allowance is calculated based on your confirmed income. Discount on insurance contribution for the newly self-employed If you have become self-employed for the first time in 2013 or later, you will receive a 22 per cent discount on the contribution under the Self-employed Persons Pensions Act for four years. If the period of self-employment ends before the four years are up, you may use the remaining discount time during a later period of self-employment. The interval between the periods is unrestricted. Unpaid insurance contributions Unpaid contributions under the Selfemployed Persons Pensions Act will decrease your. The amount of your will be reduced in proportion to your paid and confirmed contributions, separately for each period of income. If you have neglected to pay contributions for a period of time, your income from that period will amount to zero euros and you will accrue no for that period.

12 12 Earnings-related Pension Provision for Employers and the Self-employed 2016 Pension provision of grant recipients If you are a researcher or an artist receiving a grant, you must take out insurance under the Farmers Pensions Act. Mela provides and accident insurance for grant recipients. If you have received a grant from Finland for the purpose of artistic or scientific work lasting for at least four months, you have to take out insurance with Mela. Under certain conditions, work taking place abroad based on a grant also needs to be insured under the Farmers Pensions Act. In order for insurance to become necessary, the size of your grant should amount to at least EUR 3, when converted to an annual income under the Farmers Pensions Act. You have to take out insurance if you are an individual grant recipient or if you work in a collective receiving a grant. As a grant recipient, your provision is determined based on your confirmed income under the Farmers Pensions Act in the same way as for a farming entrepreneur. Your confirmed income also forms the basis of your earnings-related workers compensation insurance, as well as of the sickness allowance under the Sickness Insurance Act and the rehabilitation allowance paid by Kela. Pension insurance for foreign employees In general, work done in Finland is to be insured according to Finnish earnings-related legislation. If you are a Finnish employer, you need to insure your foreign employees who work in Finland under the Employees Pensions Act in the same way as your Finnish employees. If you are a foreign employer, you are equally obligated to arrange provision in Finland for your employees working here. Employees from an EU/EEA country, Switzerland or a social security agreement country As an employee, you are to be insured in Finland unless you can present a certificate of a posted employee. The A1 certificate must state that the legislation of some other EU/EEA country, Switzerland or agreement country should be applied during your em- Mela s customer service for grant recipients: ,

13 Earnings-related Pension Provision for Employers and the Self-employed ployment here. If you are an employee posted to Finland from another country, you are to be insured in the country in which the certificate was issued. If your work in Finland is temporary and you do not have an employer in Finland, you can be insured in another country. Possibility of exemption for employees from nonagreement countries If you are a foreign employer who posts an employee from a so-called non-agreement country to Finland to work for two years at the most, you do not have to insure that employee under the Employees Pensions Act. The exemption does not apply to a posted employee who, immediately before the work starts, has been covered by Finnish social security legislation, the EU regulation on social security or an act that is applicable according to the social security agreement. By application, the Finnish Centre for Pensions may release you from the insurance obligation for a maximum of five years from the beginning of the work in Finland. This is possible if you post your employee to Finland for more than two years or the work in Finland continues for more than two years for reasons that are impossible to predict. The prerequisite for the exemption is that you present a statement showing that you have arranged the insurance of your posted employee elsewhere. Insurance for posted employees Insurance for employment abroad is affected by whether the country of employment is an EU/ EEA country or Switzerland there is a social security agreement between Finland and the country of employment the work is performed outside the agreement countries. The EU/EEA countries and Switzerland adhere to EU s common rules on social security, which determine which country s social security legislation will be applied if you move from one country to another. In addition to Finland, the following countries are EU Member States: Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, France, Germany, Great Britain, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden. EEA countries are Iceland, Lichtenstein and Norway. In addition, Finland has concluded bilateral social security agreements with Australia, Canada, Chile, India,

14 14 Earnings-related Pension Provision for Employers and the Self-employed 2016 Israel, Québec and the United States. All agreements contain rules regarding insurance. The social security agreement between Finland and China is expected to come into force in Negotiations with South Korea and Japan are under way. Working in an EU/EEA country, Switzerland or a social security agreement country If you are a migrant worker, the EU regulations and social security agreements ensure that you are entitled to social security benefits on the same conditions as the country s own citizens, your s are paid from one country to another, you are insured in only one country, that is, you pay contributions to only one country at a time, you may take into account periods from other agreement countries when calculating the requirements regarding insurance periods (for example, five years required in Germany). This makes receiving the entitlement to a easier, but your will still be determined on the basis of the work you have carried out in each country. The baseline of EU rules and the social security agreements is that you are insured in the country where you work. If you are posted to a foreign country on a temporary basis (for 2 to 5 years, depending on the country), you may continue to be covered by Finnish social security on certain conditions. In that case, your earnings-related insurance will remain in force in Finland. There are also other special regulations, both in the EU provisions and the social security agreements, under which Finnish legislation will be applied to you while you are working abroad. For example, if you work in two or more countries, you are subject to such special regulations. In all such cases, or if you are posted from Finland, you have to apply for an A1 certificate of coverage under Finnish social security from the Finnish Centre for Pensions. For more information on the preconditions for posting, special groups and how to apply for the A1 certificate, please go to the section Pension Insurance at the website of the Finnish Centre for Pensions (www. etk.fi). Working in a country where neither EU regulations nor social security agreements apply If you are working for a Finnish employer and posted from Finland to a non-agreement country, you have to be insured in Finland under the Employees Pensions Act for as long as your work contract is valid. This obli-

15 Earnings-related Pension Provision for Employers and the Self-employed gation stands even if you have to pay contributions to your country of employment. As a Finnish employer, you may voluntarily arrange provision under the Employees Pensions Act for your posted employees who are not covered by mandatory insurance. If you are hired from abroad, you can also be insured voluntarily if you are covered by Finnish social security (earnings-related insurance or residence-based social security) at the start of your employment contract. Voluntary insurance is possible if, during the posting abroad, your employer is a Finnish company, a foreign company which belongs to the same group as the Finnish company, or a company in which the Finnish company exercises authority. The policyholder of the voluntary earnings-related insurance policy has to be a Finnish company. Salary for insurance purposes for work abroad The earnings-related contributions paid by you and your employer while you are posted abroad are based on a so-called salary for insurance purposes. The salary which would be payable for corresponding work in Finland, or the salary which may otherwise be considered to correspond to the work you do, is considered the salary for insurance purposes. If your assignment lasts for more than six months, you should determine your salary for insurance purposes together with your employer. The rule on the salary for insurance purposes concerns all work performed abroad that is insured under the Employees Pensions Act, regardless of in which country you work. Your salary for insurance purposes is also used as the basis for your unemployment and workers compensation insurance contributions for your work abroad and, in general, also for your employer s social security contribution and your health insurance, medical care and sickness allowance contributions. Insuring work abroad and certificate applications: Finnish Centre for Pensions, Insurance matters during employment abroad, ,

16 16 Earnings-related Pension Provision for Employers and the Self-employed 2016 Shortcut to information The website of the Finnish Centre for Pensions at provides information about earnings-related s for employers. The website www. tyoelake.fi is also an easy shortcut to information. You can access the pages of authorised providers through that site. Earnings-related insurance providers Elo Mutual Pension Insurance Company Tel Etera Mutual Pension Insurance Company Tel Ilmarinen Mutual Pension Insurance Company Tel The Insurance Company Pensions-Alandia Tel Varma Mutual Pension Insurance Company Tel Veritas Pension Insurance Company Ltd Tel Mela Tel The Seafarer s Pension Fund Tel Apteekkien Eläkekassa Tel Eläkekassa Verso Tel OP Bank Group Pension Fund Tel Valion Eläkekassa Tel

17 Earnings-related Pension Provision for Employers and the Self-employed The provision of employees can be arranged in an already existing fund. Companies in the same field may also establish a joint fund, if the combined number of employees exceeds 300. Correspondingly, a company that employs at least 300 employees can establish a company fund to manage the provision of its employees. Further information The Association of Pension Foundations Tel Other useful contact information Finnish Centre for Pensions Tel Keva Keva handles the s of local government, State, Kela and Evangelical-Lutheran Church employees. Tel The Education Fund Tel The Finnish Workers Compensation Center Tel The Unemployment Insurance Fund Tel The Federation of Unemployment Funds in Finland Tel

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19 SUPPLEMENT 2016

20 20 Supplement 2016 Index figures Two different indices are applied to earnings-related s. The wage coefficient concerns all persons who are in gainful employment. In the wage coefficient, the weighting of changes in salaries is 80 per cent and the weighting of changes in prices 20 per cent. This coefficient is used to revalue able earnings and the amount limits in the earnings-related acts. The earnings-related index is used to revalue all s in payment, regardless of the recipient s age. In this index, the weighting of changes in salaries is 20 per cent and the weighting of changes in prices 80 per cent. Year Wage coefficient Earnings-related index (+0.73%) 2519 (+0.00%) Life expectancy coefficient The life expectancy coefficient is determined at the age of 62 for each age group. When calculating the, the accrued is multiplied by the life expectancy coefficient. Year of birth Life expectancy coefficient Euro limits in earnings-related acts Lower limit for coverage by the Employees Pensions Act: EUR per month. Lower limit for coverage by the Self-employed Persons Pensions Act: EUR 7, per year. Upper limit for coverage by the Self-employed Persons Pensions Act: EUR 171, per year. Lower limit for coverage by the Farmers Pensions Act (incl. grant recipients): EUR 3, per year.

21 Supplement Earnings-related contributions of employees The average insurance contribution under the Employees Pensions Act in 2016 is 24 per cent of the wage. The employee contribution is 5.70 per cent for those under the age of 53 and 7.20 per cent for those aged 53 and above. The average employer contribution is per cent. The contribution for the occasional employer under the Employees Pensions Act is 25.1 per cent, from which the employer s contribution is obtained by deducting the employee s share of the contribution. Seafarer s Pensions Act The employee contribution rate under the Seafarer s Pensions Act in 2016 is 5.70 per cent for those under the age of 53 and 7.20 per cent for those aged 53 and above. According to advance information received from the Ministry of Social Affairs and Health, the employer s contribution under the Seafarer s Pensions Act will be 16.7 per cent in Earnings-related contributions of the self-employed Self-employed persons are themselves liable for the payment of contributions under the Self-employed Persons Pensions Act or the Farmers Pensions Act. The contribution is charged based on the self-employed person s confirmed income. Self-employed Persons Pensions Act The contribution under the Self-employed Persons Pensions Act is 23.6 per cent of the wage for persons aged under 53 and per cent for persons aged 53 and above. A newly self-employed person is entitled to a discount of 22 per cent on the insurance contribution for the first 48 months. Farmers Pensions Act For a reported income of less than EUR 26,281.69, the contribution is per cent for persons under 53 and per cent for persons aged 53 and above. For a reported income ranging between EUR 26, and 41,299.87, the contribution rate increases on a sliding scale. For a reported income of more than EUR 41,299.87, the contribution is 23.7 per cent for persons under 53, and 25.2 per cent for persons aged 53 and above. The estimated average contribution rate for persons insured under the Farmers Pensions Act is 13.3 per cent and 13.2 per cent for grant recipients. General interest on arrears is 7.5 per cent until 30 June It is levied on, for example, overdue contributions and s. Unemployment security of the self-employed In order to be entitled to income security for the unemployed, a self-employed person must have a confirmed income of at least EUR 12, per year.

22 22 Supplement 2016 Employer s social insurance contributions The employer s social security contribution consists solely of the health insurance contribution, which in 2016 is 2.12 per cent of the wage for all employers. Workers compensation insurance The contribution rate varies between 0.1 and 7 per cent according to the accident risk involved. The average contribution is about 0.9 per cent of the wage sum. Farmers pay a basic contribution of EUR as well as 0.75 per cent of their income under the Farmers Pensions Act. They are allowed reductions in their contributions for participation in occupational health care. The workers compensation insurance contribution of grant recipients is EUR per cent of their income under the Farmers Pensions Act. Unemployment insurance The employer pays a contribution of 1.00 per cent for the first EUR 2, of the total payroll, and 3.90 per cent for the part exceeding that amount. The unemployment insurance contribution is paid to the Unemployment Insurance Fund. Employees group life insurance The labour market organisations have agreed on group life insurance. The insurance premium for this is paid in connection with the workers compensation insurance. On average, the premium is slightly less than 0.07 per cent of the company s total payroll. The farmers group life insurance contribution is EUR 12 per year. Grant recipients do not have to pay a group life insurance contribution in Employees social security contributions Health insurance: medical care contribution 1.30 per cent, daily allowance contribution 0.82 per cent. Unemployment insurance contribution 1.15 per cent Earnings-related insurance contribution 5.70 per cent for persons under age 53 and 7.20 per cent for persons aged 53 and above. Protected amount at distraint Part of the income is protected as maintenance for the retiree and his or her family and cannot be distrained. The protected amount is EUR 678 per month and the increase for each dependent is EUR per month.

23 Supplement Impact of the earnings-related on the national Amount of earnings-related which does not entitle to a national in 2016: Single er: Married or co-habiting er: EUR 1,311.05/month EUR 1,167.71/month Full national : Single er: Married or co-habiting er: EUR /month EUR /month Guarantee Guarantee : EUR /month Pensions and taxation The earnings-related, national and guarantee s constitute taxable income. Pension income entitles to a income deduction in municipal and national taxation according to the table below. When the income exceeds the limits in the table below, the income deduction is reduced. Low-income ers receive an additional basic deduction in municipal taxation, the maximum amount of which is EUR 3,020 in The broadcasting public service tax is not levied on s that amount to less than EUR 860/month. Pension income deduction and income limits in 2016 Full deduction Pension for which tax becomes payable Municipal taxation National taxation Pension for which no deduction is made Municipal tax rate and ers medical care contribution in 2016 Average municipal tax rate on income, % Pensioner s medical care contribution, % 1.47 Total In addition, members of the Evangelical-Lutheran Church pay an average church tax of 1.43 per cent.

24 24 Supplement 2016 In the following examples, the national and the guarantee have been calculated for someone who has no other income than the earnings-related. The total is the monthly sum of the earnings-related, national and guarantee s combined. Taxes have been calculated assuming that the same monthly income has been paid throughout the year. Taxes and comparable payments have been calculated according to the final taxation in The municipal tax and the er s medical care contribution are as listed above, while the Church tax rate has been excluded from the calculation. A public service broadcasting tax of 0.68 per cent, or a maximum of EUR 143 per year, is levied on the. National s and guarantee s drawn before the age of 65 are reduced for early retirement by 0.4 per cent per month taken early. The 4.5 per cent accrual rate of the earnings-related after the age of 63 does not reduce the national. In the examples below, the earnings-related has been adjusted with the life expectancy coefficient. Single er Pension starts at age 63, reduction for early retirement on national, EUR/month Earningsrelated National Guarantee Total Taxes and contributions Taxes and contributions, % of gross Net

25 Supplement Earningsrelated National Guarantee Total Taxes and contributions, % of gross Net Pension starts at 65, EUR/month The wage that forms the basis for a accrued after age 63 is assumed to be twice the earnings-related. Earningsrelated, 63 yrs Taxes and contributions Earningsrelated, accrued after age 63 National Guarantee Total Taxes and contributions Taxes and contributions, % of gross Net

26 26 Supplement 2016 Spouse or domestic partner Pension starts at age 63, reduction for early retirement on national, EUR/month Earningsrelated National Guarantee Total Taxes and contributions Taxes and contributions, % of gross Net

27 Supplement Pension starts at 65, EUR/month The wage that forms the basis for a accrued after age 63 is assumed to be twice the earnings-related. Earningsrelated, 63 yrs Earningsrelated, accrued after age 63 National Guarantee Total Taxes and contributions Taxes and contributions, % of gross Net

28 28 Supplement 2016 Pension for social security benefits Pension accrues for social security benefits only when the earnings from work during working life amount to at least EUR 17, With the exception of the parenthood allowance, accrues from social security benefits only for the period for which compensation has been paid directly to the person. Parental benefits Maternity allowance, special maternity allowance, paternity allowance, parental allowance, partial parental allowance Sickness Insurance Act (1224/2004) Awarded by Kela Basis for the benefit Earnings forming the basis of the benefit, always at least EUR /month. Amount of the minimum allowance for period of work of the mother. - - For period paid to the employer Child home care allowance VEKL* (644/2003) Kela EUR /month for each month of child home care allowance Earnings on which the benefit is based for the accrued 117% 17% 100% * Act on reimbursement from state funds for the care of a child under the age of three and for periods of study. Sickness and rehabilitation benefits Rehabilitation allowance based on earnings-related acts Rehabilitation allowance based on the rehabilitation act of Kela (566/2005) Daily allowance granted based on rules relating to accidents at work and occupational diseases Earningsrelated providers Kela Accident insurers Earnings for projected able service Earnings forming the basis of the rehabilitation allowance Earnings (=benefit) forming the basis of the compensation, but not if the compensation for loss of income has been paid as an additional 65% 65% 65%

29 Supplement Sickness and rehabilitation benefits Compensation for loss of income granted based on rules governing motor liability insurance Daily allowance according to rules governing military accident insurance Sickness allowance, partial sickness allowance Sickness Insurance Act (1224/2004) Compensation for job alternation leave (Act on Alternation Leave 1305/2002) Basic allowance and labour market support under the Unemployment Security Act (1290/2002) Training benefits Adult training allowance according to the Act on Adult Training Allowance (1276/2000) Degree Basic vocational qualification VEKL* (644/2003) Motor liability insurers The State Treasury Kela Unemployment funds Unemployment funds The Education Fund Kela See workers compensation insurance See workers compensation insurance Earnings that forms the basis for the sickness allowance as referred to in the Sickness Insurance Act, half of this sum in the case of partial sickness allowance Earnings forming the basis of the compensation for alternation leave Earnings forming the basis of the earningsrelated unemployment allowance Earnings forming the basis of the adult training allowance, for the selfemployed, EUR / month EUR /month for a period determined based on the degree level 65% 65% 65% 55% 75% 65% 100%

30 30 Supplement 2016 Pension accrued for periods of study Earnings-related accrues for studies leading to a vocational basic qualification or a university degree. This applies only to degrees taken in 2005 or later. Pension that accrues for periods of study is determined on the basis of calculated monthly earnings amounting to approximately EUR 718 in The accrual rate is 1.5 per cent per year.pension does not accrue for the actual time of study but for a calculated period of study based on the degree received. For a basic vocational qualification, accrues for three years at the most. For a degree from a university of applied sciences, accrues for a maximum of four years. For a lower university degree, accrues for a maximum of three years. For a higher university degree, accrues for five years at the most. However, accrues for periods of study to the maximum amount of five years, even if the person were to complete several degrees.

31 Supplement Reduced surviving spouse s 2016 Deceased person s Surviving spouse s own

32 Finnish Centre for Pensions ELÄKETURVAKESKUS Service centre for the Finnish statutory earnings-related scheme Finnish Centre for Pensions Customer service and visiting address: Kirjurinkatu 3, Itä-Pasila, Helsinki Postal address: FI ELÄKETURVAKESKUS, Finland Picture: Pixabay.com

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