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Pension Insurance for Employers and Entrepreneurs
The self-employed person's insurance
The self-employed person's pension insurance (the Self-employed Persons'
Pensions Act YEL) is a central part of the self-employed person's safety
net. The Self-employed Persons' Pensions Act (YEL) covers different situations
in life. Earned income is the basis for the insurance. The pension amount
and the insurance contribution are calculated on the basis of this income.
It should be noted that the earned income also affects the self-employed
person's other social security benefits, such as sickness allowance. The
self-employed person's insurance is a production cost for the firm. The
insurance contribution is fully deductible in the taxation.
Insurance under the Self-employed Persons' Pensions
Act (YEL) pays itself back
The money invested in a self-employed person's insurance policy usually
pays itself back, and with interest, because three out of every four persons
having retired on a self-employed person's pension live longer than the
investment warrants. A clear majority of the persons retired on a self-employed
person's pension are others than the persons retired on an old-age pension.
The comparisons are in favour of all-inclusive self-employed person's
pension cover. For instance, individual pension insurance often offers
only an old-age pension.
Liability to take out insurance
According to the Self-employed Persons' Pensions Act (YEL) and the Farmers'
Pensions Act (MYEL), insurance is obligatory when the requirements in
the acts are applicable on the self-employed person;
- a self-employed person is not working under an employment contract
or in public office
- the insured is between 18 and 64 years old
- the business activity has lasted for at least four months
- the estimated earned income in 2004 is at least 5,504.14 euros annually
The earned income is determined by the self-employed person's work input.
This corresponds, for instance, to the salary paid to an employee.
A person with a leading position in a limited company and who owns more
than 50% of the shares has to be insured in accordance with the Self-employed
Persons' Pensions Act (YEL). A partner in a partnership and a responsible
partner in a limited partnership are considered self-employed persons.
No insurance obligation
Previously it was possible for self-employed persons to apply for an exemption
from statutory insurance under the Self-employed Persons' Pensions Act
(YEL) if their pension provision was arranged in some other way. It is
no longer possible to get an exemption after the beginning of 2002. However,
self-employed persons under YEL and farmers under the Farmers' Pensions
Act (MYEL) can, upon application, be left uninsured. The prerequisite
for this is that they no longer accrue new pension rights under the pension
acts for self-employed persons. Old exemptions can continue if the criteria
are fulfilled.
Examples of insurance in different company forms
Private firm: One of the spouses is registered as owner of the firm and
the other spouse is working in the firm without pay, both are insured
under the Self-employed Persons' Pensions Act (YEL). A child living in
the same household as the owner of the firm and who is working in the
firm without pay is insured under the Self-employed Persons' Pensions
Act (YEL). A child living in the same household as the owner of the firm
and who is working in the firm against pay is insured under one of the
employees' pension acts.
Partnership: A partner is insured under the Self-employed Persons' Pensions
Act (YEL). A family member working in the firm, but who is not a partner,
is insured under one of the employees' pension acts, if he or she receives
salary.
Limited partnership: A responsible partner is insured under the Self-employed
Persons' Pensions Act (YEL). A silent partner or a family member who works
in the firm, but who is not a partner, is insured under one of the employees'
pension acts, if he or she receives salary. Otherwise he or she is not
covered by statutory pension benefits.
Limited company: A person with a leading position who alone or together
with his or her family members owns at least half of the shares or voting
rights in the company is insured under the Self-employed Persons' Pensions
Act (YEL). A member of a partner's family working in the company but not
owning shares in the company is insured under one of the employees' pension
acts, if he or she receives salary. Otherwise he or she is not covered
by statutory pension benefits.
Note! In all cases the requirement is that the person is working in the
company.
Supervision of the liability to take out insurance
Henceforth a self-employed person only accrues pension rights on the basis
of paid YEL contributions. If the self-employed person has neglected to
pay contributions and the contributions have expired, his or her YEL pension
will be reduced. If contributions have been left unpaid a certain year,
the earned income for that year will be reduced in proportion to the unpaid
contributions. If the contributions for a certain year are left unpaid
altogether, the earned income for that year is € 0 when calculating
the pension.
The Finnish Centre for Pensions supervises earnings-related pension insurance
for self-employed persons. If a self-employed person has not taken out
insurance, the Finnish Centre for Pensions reminds him or her to do so
within a reasonable time period. If the self-employed person fails to
heed the reminder, the Finnish Centre for Pensions takes out YEL insurance
with a pension provider, on the self-employed person's behalf and at his
or her expense. For the period of neglect, the contribution may amount
to double the normal contribution.
The Finnish Centre for Pensions can take out insurance retroactively
for the current and the three preceding years. The self-employed person
may also, on his or her own initiative, take out insurance for the period
before enforced insurance. The self-employed person may also himself or
herself take out insurance retroactively for a corresponding time period.
Visit The
Finnish Centre for Pensions
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