A recently published report recommends anchoring the core earnings measure used in Finland’s statutory self-employed pension scheme (YEL) directly to entrepreneurs’ taxable earned income.
If adopted, the reforms would mark one of the most significant overhauls of entrepreneur, or self-employed, pension rules in decades, with potential implications for contribution levels, long-term pension adequacy and the financial sustainability of the broader earnings-related system.
The report comes on the back of a review led by pension expert Jukka Rantala, former head of Finnish Centre for Pensions (Eläketurvakeskus, ETK), who was commissioned by the government to lead the review in December 2024.
The goal of the review was to identify ways to modernise the definition of ‘entrepreneurial income’, the basis on which YEL contributions and ultimately pension accruals are calculated, amid longstanding concerns about under-insurance and inconsistent practices across sectors.
Rantala’s report puts forward a series of proposals aimed at increasing transparency, reducing scope for subjective assessments and improving the adequacy of pension coverage for the self-employed, affecting around 300,000 self-employed workers.
Under the main proposal, entrepreneurial income would be set according to taxable earned income generated by business activity.
Taxable income
Rantala argues that adopting taxable income as the primary rule would simplify administration, better reflect fluctuating earnings common among entrepreneurs, and substantially curb widespread under-declaration.
As an accompanying measure, Rantala suggests allowing entrepreneurs whose taxable income exceeds €35,000 a year to opt for the current model instead, which relies on an estimate of the labour input required for the business activity.
This dual-track system, he said, would preserve flexibility for higher-income entrepreneurs whose business structures or earnings patterns may not be accurately captured by taxable income alone.
The report also calls for improving the overall coverage of the earnings-related pension system. Rantala proposes abolishing the existing four-month minimum duration before self-employed individuals are required to insure themselves.
Instead, mandatory insurance would apply once annual income surpasses three times the lower threshold used in the employee pension system (TyEL), equating to approximately €2,520.
Finland’s Ministry of Social Affairs and Health is expected to launch consultations on the proposals in the coming months.
Analysis from ETK highlights the extent to which current YEL incomes diverge from actual taxable earnings. According to the findings, 74% of entrepreneurs reported higher taxable earned income than the YEL income used to determine their pension contributions.
The average YEL income in 2022 was around €22,500, with nearly 60% of entrepreneurs declaring less than €20,000. By contrast, average taxable earned income from entrepreneurial activity reached approximately €36,500, and 46% of entrepreneurs recorded income between €10,000 and €40,000.
ETK’s data underline the systemic gap between declared pension income and actual business earnings, a disparity policymakers fear could leave large numbers of self-employed Finns with inadequate pensions. ETK examined 2022 data drawn from the joint earnings register of the Finnish earnings-related pension system and Statistics Finland.
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