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The number of underinsured self-employed persons in Finland on the rise

Assessment basis often only close to minimum requirement.

TH – 05/2019

Statistics from the Finnish Centre for Pensions (ETK) show that 207,000 self-employed persons in Finland were insured under the Self-employed Persons’ Pensions Act (YEL) in 2018.

 

According to the ETK, two out of five of these self-employed persons are underinsured based on their 'confirmed income' which constitutes the tax base for their pension calculation and social security. In addition, one in four of them only puts their confirmed income at, or close to, the statutory minimum requirement of €7,656 per year.

Confirmed income, as stipulated by the YEL, is not only the basis for income-related pensions and social security for self-employed persons but is also used for various other social security benefits to which they are entitled, such as sickness benefits, unemployment benefits and family benefits. The legislation states that each self-employed person must declare their confirmed income in a way that corresponds to the respective value of their employment; it is nevertheless often lower than the self-employed person’s taxable income.

 

Social security only at the level it was at start of the millennium

The ETK points out that the real-term average confirmed income of the newly self-employed in 2018 was at the same level it was in the early 2000s. In addition, the average value of the currently insured confirmed income decreased last year across all age groups of insured self-employed persons. The confirmed income of younger age groups fell more than that of older age groups.

 

The earnings-related pension insurance of self-employed persons serves as income insurance if self-employment ends due to disability or age. It also provides a survivor’s pension if the self-employed person dies. However, the level of confirmed income used to determine the amount of benefits is likely to be widely insufficient in the event of a benefit being claimed.

The statistics can be viewed on a case-by-case basis by specifying appropriate parameters.