Finland has launched a consultation on plans to overhaul pension contributions for self-employed workers, advancing a reform designed to give entrepreneurs greater flexibility while maintaining the earnings-related pension system.
The Ministry of Social Affairs and Health has published draft legislation on changes to the YEL system, Finland’s statutory pension fund for the self-employed, following an agreement reached earlier this year by labour market organisations and the government.
The proposal would introduce a new “freedom of choice” model allowing entrepreneurs to select the basis on which their pension contributions are calculated.
Under the current system, contributions are determined according to YEL income, an estimate of the value of a person’s work input. The approach has been the subject of criticism in recent years, particularly following reforms intended to ensure YEL income more closely reflected the economic value of entrepreneurial activity.
The proposed model would allow self-employed workers to choose either their taxable earned income or YEL income as the basis for contributions.
According to the ministry, the objective is to improve the attractiveness of entrepreneurship and make the pension system more flexible while safeguarding pension security.
The draft legislation also includes mechanisms intended to prevent significant under-insurance. A minimum level of YEL income would continue to apply, with the threshold linked to taxable earned income.
The consultation period will run until September, after which the government will consider the responses before deciding on the next steps in the legislative process.
Finnish earnings-related pension provider Ilmarinen welcomed the agreement underpinning the reform, saying the proposed model would provide entrepreneurs with greater flexibility in determining their pension contributions.
At the same time, Ilmarinen noted that maintaining adequate pension coverage remains important for long-term retirement security.
“Taking the first steps toward an earnings-based model is a good start,” said Tiina Nurmi, Ilmarinen’s executive vice president, insurance and pension services.
“Basing insurance on earnings is clear, fair and flexible for entrepreneurs,” she added.
The reform represents the latest attempt to address the longstanding debate over how self-employed workers should participate in Finland’s earnings-related pension system.
The issue has attracted increasing attention in recent years as policymakers, pension providers and entrepreneur organisations have sought to balance pension adequacy with concerns over the cost and predictability of contributions.
If implemented, the changes would mark one of the most significant adjustments to the YEL framework in recent years, shifting the system towards a more flexible model while retaining its statutory earnings-related structure.
