Finnish pensions lobby TELA has criticised the government’s proposal to reform the entrepreneurs’ pension scheme for only being partially what is needed, saying it fails to solve key flaws in the system.
Janne Pelkonen, special expert at TELA, which represents all the Nordic countries’ earnings-related pension providers, said: “It is positive that the government is moving the entrepreneurs’ pension system towards earnings-based insurance.
“The change is historic, as insurance based on actual earnings has finally been accepted as a principle in YEL [Finland’s self-employment pension scheme]. So the direction is right, but the current implementation is only half a solution,” he said in a statement today.
Pelkonen was reacting to part of the general fiscal plan for 2027-30 presented by prime minister Petteri Orpo’s government yesterday – a plan billed overall as measures to build confidence and boost growth in uncertain times.
As part of the plan, the government proposed amendments to YEL, saying that reforming the scheme would “improve the environment for entrepreneurship and give entrepreneurs room to grow their businesses”.
From 2028, according to the proposal, self-employed people in Finland will be able to choose to use either taxable earned income from self-employment, or the current confirmed income model – which estimates the monetary value of a self-employed person’s work input – as the basis for their pension contributions.
After a transition period, however, “confirmed income” would have to be at least 50% of an entrepreneur’s taxable earned income, the government proposal states, along with other details of how the rules would work.
Citing figures from the Finnish Centre for Pensions and the Ministry of Finance, the government said that at the 2033 level, contributions would drop for nearly 40% of self-employed people under the proposal, while remaining the same for more than 40%, and rising for 20% compared with the current model.
“The reform will increase the central government’s share of the payment of self-employed persons’ pensions by about €80m,” it said.
TELA’s Pelkonen took particular aim at this increase in state spending, saying: “The government has said that the YEL reform will increase state spending by about €80m per year, even though, at the same time, the government was desperately looking for several hundred million euros in adjustments to the public finances.”
He said the YEL system was already running a deficit of about €600m.
“A solution that increases state spending in general in this economic situation should be viewed critically,” Pelkonen added.
He also said that while the earnings-related pension industry had long favoured switching to earnings-based insurance for the YEL scheme, leaving individuals with the freedom to choose the basis for contributions, threatened to water down the reform.
“This freedom of choice model creates new incentives for optimising earned income in different life situations and stages, which may increase government spending even more,” Pelkonen said.
“It is likely that, especially in higher-income brackets, choices will lean towards confirmed income, which in these income brackets brings lower pension contributions than in the broad earnings model,” he noted.
