How will my pension be paid and taxed?

Every month, your pension provider will pay your earnings-related pension into your bank account. Different pension providers pay on different dates, but most of them pay out pensions on the first banking day of the month. Earnings-related pensions are also paid abroad, regardless of your nationality.

New tax card for pensioners

You need a new tax card for your pension as pensions and wages are taxed differently since you get a tax deduction on your pension income.

Once you have got the pension decision, apply for the tax card as soon as possible. The Tax Administration needs the following information or documents in order to calculate your tax rate:

  • the pension decision,
  • an account of all income you have got so far during the year, and
  • information on your tax withholdings and deductions so far during the year.

If you don’t have a tax card for pensioners, the pension provider that pays out your tax will withhold 40 per cent of your pension in tax. Once you get your tax card, the pension provider will either refund or take into account the excess tax they have withheld when they pay out your pension the next time.

If you work while you get a pension, you need a separate tax card for your wage. If your pension amount or the amount of your other income changes, make sure your tax rate is adjusted. You don’t have to notify the Tax Administration of changes that are due to index adjustments.

If your pension payments are changed or interrupted

Your disability pension can be interrupted for a fixed period or suspended altogether if your working or your working ability change after the pension has been granted.

You can leave your pension dormant (that is, request that your pension is temporarily suspended) for at least three months but no more than two years. While your pension is suspended upon your request, there are no limits to how much you can earn while working.

Your disability pension can also be changed to another type of pension. Similarly, another type of pension can be changed into a disability pension if the grounds on which you get the pension change.

If you get a part-time pension and are completely laid off until further notice or for more than six weeks, your part-time pension will be suspended six weeks after you are laid off. If you are laid off for less than six weeks, your part-time pension is not automatically suspended. However, if your annual earnings drop below the minimum level, it may be suspended.

 

If you live abroad

In general, tax agreements between Finland and other countries do not prevent Finland from charging tax on your pension. However, there are special tax agreements between Finland and certain other countries which may affect the taxation of your pension.

As a rule, if you live abroad permanently, your pension is taxed as if you lived in Finland. The tax authorities will withhold an advance tax on your pension according to your tax rate. The tax rate depends on what your income is. You will pay your taxes in the same way as if you lived in Finland, so you will have to file a tax return. You will have the same right to a pension income deduction and a tax deduction based on your degree of disability as if you lived in Finland.

For more information on the taxation of pensions, contact the Finnish Tax Administration.

How do I get my pension card?

When you get your earnings-related pension, your pension provider will also send you a pension card.

You can use your pension card to get discounts for services or products from many companies. you may also have to show your official ID card because your pension card does not come with your photograph.

You can get discounts on, for example, domestic train (VR), airline (Finnair) and bus (Matkahuolto) tickets. You may also get discounts for municipal services and many cultural events. Check the specific terms and conditions at the ticket office.

You get a pension card if you get an old-age or a disability pension.

If you are getting a part-time pension, a partial disability pension or a partial old-age pension, of if you are getting a cash rehabilitation benefit, you do not get a pension card.

Your name, date of birth, as well as the name of the pension provider that has granted your pension, are stated on the card.

If you have the right to get a pension card but have not received it yet, or you have lost your card, contact your pension provider.

Pension indexes

Index adjustments make sure that the level of your earnings-related pension is not weakened during retirement.

The wage coefficient is used to adjust earnings from work and self-employment, as well as the limits set in the earnings-related pension acts. The index is also used to adjust vested pensions.

When you start drawing your pension, your pension provider indexes the wages and earnings that you have got during your working life with the wage coefficient to the level of the year when you start drawing your pension.

In this index, the change in price levels weighs 20 per cent and the change in wage-earners’ income levels weighs 80 per cent.

The earnings-related pension index is used to adjust all pensions in payment.

In this index, the change in price levels weighs 80 per cent and the change in wage-earners’ income levels weighs 20 per cent.

 

National pensions are adjusted with the national pension index.

Lump-sum payment and delayed payment

If your earnings-related pension is less than €30 a month, you will not get a payment every month. Instead, your pension provider will pay you your earnings-related pension in one payment, which is called a lump sum.

If you are a widow(er) under the age of 50 and you remarry, you will get a lump-sum payment equal to three years of your surviving spouse’s pension.

If you pension payments are delayed, you will get interest on your pension if

  • the delay is your pension provider’s fault, and
  • the delay is longer than three months.

The interest will be calculated for every day of delay.