10.25.1.30 Social Security System in Finland

Finland's social security system

The social security system in Finland is basically split into 2 different pension schemes, the National Pension scheme (KELA) and the Employment Pensions' scheme (TyEL).

The Ministry of Social Affairs and Health is responsible for making policy decisions and supervising the operation of both schemes. KELA is the Social Insurance Institution that administers National Pensions. The Finnish Centre for Pensions is the central body responsible for the administration of Employment Pensions (Earnings-Related Pensions).

National Pension

The Finnish National Pension Act started in 1937.

The National Pension Act covers Finnish National Old Age Pension, Disability Pension and Survivors' Pension.

Entitlement to National Pension is based on residence and covers all people residing in Finland aged between 16 and 64. It provides a minimum guarantee pension. The minimum qualifying period is usually 3 years residence in Finland since the age of 16. Old Age National Pension is usually paid at age 65, though an early (reduced) pension can be paid from age 62 and an increased pension can be paid if deferred to after 65 years of age (there is no limit on how long a pension can be deferred).

National Pension is pension income tested, (i.e. all pensions from Finland and abroad are assessed, including Finnish Earnings-Related Pensions). Without the use of an Agreement, National Pension is generally only paid to people in Finland or for absences from Finland of less than one year. The rate of National Pension is adjusted according to the person's length of residence in Finland. A full pension tested National Pension is paid to a person who has lived in Finland for at least 80% of their working life (between ages 16 and beginning of Finnish pension).

Earnings-Related Pension

The Finnish Employees' Pension Act started in 1961. In 2007, several smaller Pension Acts (including the Self-Employed Person's Pensions Act, the Seamen's Pensions Act and the Local Government Pensions Act) were incorporated into the Employees' Pension Act.

The Employees' Pension Act covers Finnish Earnings-Related Old Age Pension, Disability Pension, Survivors' Pension, Unemployment Pension and Part-Time Pension.

The Employees' Pension scheme is an insurance/contribution scheme and entitlement to an Earnings-Related Pension is based on earnings and accrual. Around 50% of Finnish National Pension recipients also receive a Finnish Earnings-Related Pension.

Earnings-Related Pension rate calculations are based on earnings of the whole working career. Pension accrual can occur between the ages of 18 and 68.

The minimum qualifying period for Earnings-Related Old Age Pension is one month's period of coverage. Old Age Pension is payable from age 63, although a reduced 'early old-age pension' can be paid from age 62. There is no restriction on Earnings-Related Old Age Pensions being paid outside of Finland. Retirement from employment is usually necessary before Old Age Pension is payable, though this is not required with some of the incorporated Pension Acts (i.e. Self-Employed Pensions Act).

Part-time Pension is payable from ages 58 to 67 (ages 56 to 67 for people born before 1947) for people who wish to continue working part-time and also receive a pension.

Disability Pension is payable from ages 18 to 62 and becomes Old Age Pension at age 63.

Unemployment Pension is payable from ages 60 to 62 and becomes Old Age Pension at age 63.

Survivors' Pension is payable to a child from ages 0 to 18 and for a surviving spouse from age 50.