Is pension insurance mandatory?

Satunnainen

Pension insurance is an important part of the social security system in many countries, and it provides financial security in case of old age, disability or the death of a family caregiver. In Finland, pension insurance is mandatory in certain situations, but not in all. This article discusses when pension insurance is mandatory and when it is voluntary.

Mandatory pension insurance

In Finland, pension insurance is mandatory in the following situations:

  • Employees: All employers must take out occupational pension insurance for their employees. This applies to both full-time and part-time employees. The employer pays part of the insurance premium, and part is deducted from the employee’s salary.
  • Entrepreneurs: Entrepreneurs must take out pension insurance in accordance with the Entrepreneur’s Pension Act (YEL) if their income exceeds a certain limit defined annually. In 2023, this limit is 8,575.45 euros per year. YEL insurance premiums are based on the self-employed income reported by the entrepreneur.

Voluntary pension insurance

Although mandatory pension insurance covers the majority of employees and entrepreneurs, there are situations where pension insurance is voluntary:

  • Freelancers and light entrepreneurs: If the income of a freelancer or light entrepreneur falls below the YEL limit, they can take out voluntary pension insurance if they wish. This can be reasonable if you want to ensure sufficient pension savings in the future.
  • Supplementary pension insurance: Many people take out voluntary supplementary pension insurance to supplement their statutory pension coverage. These policies can provide additional coverage and flexibility for retirement dates.

Importance of pension insurance

Pension insurance is an important part of an individual’s financial security. It ensures that the person has income even after the end of the working career or in case of incapacity. The mandatory pension insurance system guarantees that the majority of the population is covered, but voluntary insurance offers the possibility of additional coverage.

Sources

More information about pension insurance and its obligation can be found in the following sources:

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