Everybody who works in Finland earns an income-based pension. Those who are not gainfully employed or who have earned only a small income-based pension will receive a residence-based basic pension.
Forms of pension
An earnings-related pension and basic pension are paid as an old-age pension, disability pension, cash rehabilitation benefit, unemployment pension and survivors' pension. An earnings-related pension is also paid as a part-time pension.
A disability pension is granted on the basis of long-term inability to work. Cash rehabilitation benefit is a disability pension that is granted for a given period. Rehabilitation is always the first option.
A survivors' pension is granted to the surviving spouse and children below the age of 18. The Social Insurance Institution of Finland, Kela, also pays a child pension to children who study full time and who have not reached the age of 21.
The retirement age for an old-age pension is flexible within the earnings-related pension scheme. A person can start to draw a pension according to choice between the ages of 63–68. The pension age for the basic pension is 65.
Earning a pension entitlement
Normally a person earns a pension that is 1.5 per cent of the annual work income. The percentage increases with age. Those who work after having reached the age of 53 accrue the pension according to 1.9 per cent of the annual income and those who have reached the age of 63 accrue 4.5 per cent of the annual income.
The basic pension is calculated in proportion to the time during which the pension applicant has lived in Finland. If the pension applicant has not lived for at least 40 years in Finland between the ages of 16–64 years, the national basic pension is reduced in proportion to the time during which the person has lived abroad.
Earnings-related pension insurance
Earnings-related pension insurance in Finland is decentralised. Employers and self-employed persons take out insurance with a pension insurance company or a pension fund. The earnings-related pension scheme maintains a general register of pension information.
Both the employer and the employee pay pension insurance contributions but the employer deducts the employee’s contribution from the employee’s wages and pays it in together with the company’s contribution.
Different groups are insured according to different earnings-related pension acts. Employees in the private sector are insured according to legislation on pensions for employees. There is individual legislation governing pensions for self-employed persons, farmers, seamen and civil servants, municipalities and the church.
You can receive a basic pension if you do not receive an earnings-related pension or if your earnings-related pension is very small. The basic pension is granted and paid by Kela. To receive a national basic pension it is presumed that you have lived in Finland for at least three years after you have reached the age of 16 and that the other pensions and benefits you receive do not exceed the income limit above which the basic pension is no longer paid. The pension amount may also depend on whether you are married or cohabiting.
Special support for immigrants
Immigrants who have reached the age of 65 and are not capable of working will receive special support for immigrants from Kela when they have lived continuously in Finland for 5 years. It is also assumed that they are not entitled to a full basic pension.