When you work, you earn pension. Earnings-related pension insurance is money that is set aside to make sure you have an income when:
- you are old,
- you develop a disability, or
- the wage earner in your family dies.
If your earnings-related pension is small, or if you have not had income from work, you may get a national and a guarantee pension paid by the Social Insurance Institution of Finland (Kela).
Earnings-related pensions are statutory, which means they have been set up in law.
If you work in Finland, by law, you must have pension insurance. This means that you and your employer must pay money into an earnings-related pension for your retirement. If you are an employee, your employer will automatically withhold your share of the contribution from your wages and pay the total contribution to the pension provider. Remember to check your payslip to make sure your employer has met its obligation to take out pension insurance for you.
If you are self-employed, you have to pay the total contribution yourself. You are considered self-employed if you:
- receive a grant in the arts or sciences,
- are a farmer, or
- are a self-employed worker.
The pension providers collect the contribution, manage pension funds and grant and pay out pensions. As part of the collected contributions are funded, the investment return of the pension funds can be used to finance pensions. This way, the level of the pension contributions remain reasonable.
Even if your workplace changes or you become self-employed, or the other way around, the data on the pension you have earned remains intact in the registers of the pension providers and the Finnish Centre for Pensions. You can check this data on your pension record.
Parliament enacts the earnings-related pension laws. The Ministry of Social Affairs and Health prepares the acts. The earnings-related pension laws are developed in cooperation by
- the State,
- employer organisations, and
- employee organisations.
Together, we all finance earnings-related pensions.