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Govt. subsidizes entrepreneurs’ pensions with additional €60m
Mikael Pentikäinen, the CEO of Suomen Yrittäjät, the Finnish SME association, says several reasons could be behind increased state subsidy of entrepreneurs’ pensions.
The Helsingin Sanomat newspaper reports that the Finnish state is contributing €60m more to entrepreneurs’ pensions this and last year than previously estimated.
The state pays around one third of the cost of entrepreneurs’ pensions. The state’s contribution covers the shortfall between the pension contributions paid by today’s business owners and the total pension bill. Unlike employees’ pension contributions, entrepreneurs’ pension contributions are not placed in a fund.
On 28 May, the Cabinet Finance Committee decided to allocate an additional €60m.
“Of course, it’s not good that the state has to subsidize entrepreneurs’ pensions even more,” says Suomen Yrittäjät CEO Mikael Pentikäinen.
The Committee’s documents show that just under €522m had previously been allocated for entrepreneurs’ pensions in 2024. A report by the Finnish Centre for Pensions shows that the final state subsidy for 2024 was €565m, of which €541m was paid in advance, leaving an additional funding need for 2024 of €24m.
In addition, the subsidy for 2025 is estimated at €558m, creating an additional funding need for 2025 of €36m.
The total additional funding need for last year and this year is €60m.
Several reasons in background
Pentikäinen says that several factors may contribute to the state’s growing contribution.
“Firstly, government officials may not have correctly forecasted changes in the numbers of YEL (pension insurance) policyholders, levels of YEL incomes, or numbers of retiring business owners. They’re hard to predict.
“Secondly, the number of business owners with YEL policies appears to have decreased during 2025. Some pension providers are bad at communicating this change, however. Because many business owners are facing tough times, pension providers’ expectations of trends in YEL incomes this year could have been optimistic.
“Thirdly, many business owners are closing their businesses and retiring, which raises pension expenses. Last year, 43,900 business wound up.”
Pentikäinen says that another reason for the shortfall could be the low incomes of many business owners.
“According to the most recent Yrittäjägallup survey, 34% of full-time business owners earn below €30,000 annually. The share of low-income business owners appears to have grown. Factors such as the economic situation and VAT hikes rises have contributed.”
Pentikäinen says that pension providers’ reporting on their entrepreneur customers leaves much to be desired.
“They should communicate more, and more clearly. The current situation shows how important an efficient pension system is. The current method of securing entrepreneurs’ pensions is not very efficient or transparent.”
Suomen Yrittäjät proposes solutions for entrepreneurs’ pensions
The Government has launched a study of entrepreneurs’ pensions (YEL). Rapporteur Jukka Rantala has until the end of November to submit his report. Suomen Yrittäjät proposes the following solutions to improve the YEL system:
- Increase the compulsory lower limit for YEL pension insurance pursuant to the Entrepreneur’s Pension Act to at least the lower level of earnings-related unemployment benefit. This would mean business owners who rely on basic social welfare would not have to pay expensive pension contributions and that benefits in the compulsory system would exceed the minimum welfare level
- In the future, an evaluation of the business owner’s labour input could continue to be used to verify whether the person fulfilled their insurance obligation. However, business owners above the minimum level should have more freedom to choose their level of security
- In addition, the possibility of including a funding feature in the YEL system should be investigated, as it is the only way to reduce the growing State share in self-employed persons’ pensions.
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