New round of YEL income reviews

Pension providers have begun review incomes for YEL purposes, known as YEL incomes. This year, the YEL incomes under review are those under €25,000 and which have been in force for at least three years by some point this year. In addition, all YEL incomes that have not changed or been reviewed for the past three years are under review.

The first YEL income review happens no later than the year when three years have passed since the YEL policy began or since the last substantial change to YEL income preceding the amendment to YEL legislation. For example, that means that as a rule, the YEL incomes of policies that began in 2022 will be reviewed this year.

The pension provider Elo says that the review round began in June and will continue until October. So far, Elo has review around half of the batch of 12,000 YEL policies.

“The most common increase to YEL income has been €4,000, as in previous years. That’s been the increase in over 80% of cases,” says Insurance Director Harri Kangaskoski.

This €4,000 increase in YEL income works out to an additional €85 in terms of the monthly YEL payments that the business owner pays.

The 2023 entrepreneur pension or YEL reform included a transitional period which affected YEL policies that existed when the law entered into force. The transition period has been sharply criticized by business owners with YEL policies which entered into force on or after 1 Jan. 2023. The 2026 YEL income reviews will also be the first for business owners who have taken out YEL policies after the amendment to the law entered into force.

“We believed something needed to be done, as the situation was not good in terms of equitable treatment of business owners, and could lead to very difficult situations for people starting their own businesses,” said Labour Market Affairs Manager Harri Hellstén in an earlier article of ours.

Protected portion limits increase amount

We have reported on business owners whose proposed new YEL income has been erroneous. Kangaskoski says that business owners are always entitled to provide their own view of their YEL income.

“In some cases, business owners have criticized the significance of turnover in setting YEL income. The share of complaints of all YEL income reviews has been around two per cent.”

The legislative amendment in force since 1 Jan. 2023 introduced a protected portion which prevents YEL income increases of more than €4,000. Kangaskoski says that in many cases increases would be significantly higher if the law did not provide for a protected portion.

“When this is discussed publicly, this protected portion rule is often forgotten. It means that we can only increase the YEL income by over €4,000 if the business owner wants it. If there were no protected portion, the YEL income would exceed €8,000 in many cases.”

Kangaskoski believes that YEL incomes will gradually increase in the coming years as reviews continue. When it proposes a new YEL income to business owners, Elo says that the YEL income would be if there were no maximum limit.

Before the bill was passed, Suomen Yrittäjät proposed maximum increase caps to Parliament’s social affairs and health committee to ensure individual business owners’ YEL incomes would not be changed too quickly or severely.

YEL calculator primary evaluation tool

When setting YEL incomes, the pension providers primarily use the YEL income calculator, an auxiliary tool developed by the Finnish Centre for Pensions. The calculator has been criticized in the past, which led to it being modified last year.

“The changes ensured that the calculator definitely uses the right data. Before, the calculator might have only taken a person’s management position into account, even if they weren’t obliged to take out YEL,” Kangaskoski says.

On the basis of the calculator’s proposal, the pension provider composes a consultation letter to the business owner to allow the owner to comment and present more precise information to support the YEL income evaluation. Kangaskoski says that some YEL incomes have been left unchanged on the basis on information provided by business owners. If a business owner does not respond to the letter at all, the proposed proposal of €4,000, in line with the protected portion, takes effect.

In Elo’s review round, under one fifth of business owners who received a proposal applied to keep their YEL incomes at the previous level. In some cases, the final increase has been smaller than the €4,000 increase proposed in the consultation letter. Pension providers are able to request additional information from a business owner.

“For example, we might ask for information about the business owner’s labour input or how much work they do in the company. The YEL income could change if the company’s operations have decreased.”

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