Parties firmly reject scrapping YEL minimum threshold

Reform of the YEL system sparked debate at a panel discussion held in conjunction with the meeting of the Representative Council of Suomen Yrittäjät, the Finnish SME association.

The panel consisted of the MPs Jukka Kopra, Chair of the National Coalition Party’s parliamentary party; Markus Lohi, Vice Chair of the Centre Party, Miko Bergbom, Vice Chair of the Finns Party’s parliamentary party, and Joona Räsänen of the SDP.

Kopra considers the current situation unreasonable for business owners.

“The current system is not good, because it has pushed many business owners into an unreasonable position. YEL contributions are being paid at a level that is not in proportion to actual income. This is what we now intend to correct,” Kopra said, referring to the YEL reform report by Jukka Rantala, which was due soon after the event.

The rapporteur appointed by the Ministry of Social Affairs and Health was due to deliver his report on the entrepreneur’s pension system (YEL) by 30 Nov. At the same time, the National Coalition Party (NCP) has founded its own YEL group, which will submit its own proposal to the rapporteur’s group.

“Pre-funding is not a short-term solution, but in the long term it is the only option.”

Miko Bergbom, Finns Party

Pre-funding or not?

Miko Bergbom, Vice Chair of the Finns Party’s parliamentary party, considers the lack of pre-funding in the YEL system a major problem.

“Pre-funding is not a short-term solution, but in the long term it is the only option. With pre-funding, the system can be financed through returns on capital.”

By contrast, Markus Lohi, Vice Chair of the Centre Party, does not support pre-funding.

“We see it as problematic. If we moved towards pre-funding, it would mean collecting even higher YEL contributions from business owners. If YEL insurance were to be brought to the same level as employee pensions, we would need to find €9–10 billion somewhere. That’s impossible in the current situation. The easiest solution would be to look at how the YEL income calculator and its formula can be made fairer.”

SDP MP Joona Räsänen considers the determination of YEL income the central reason behind the sense of unfairness.

“The biggest challenge in this reform arises from the economy. As I understand it, business owners do not want to finance the current YEL system.”

“The threshold for starting a business must not be raised. It’s good for it to be low.”

Markus Lohi, Centre Party

Little appetite for scrapping YEL minimum threshold

Suomen Yrittäjät has called for the minimum YEL contribution threshold to be raised. Within the NCP’s own YEL working group, there have been calls for the threshold to be abolished altogether. Suomen Yrittäjät says this would hit small-scale business owners in particular, as well as those running a business alongside paid employment.

“With freedom comes responsibility. If full freedom is given in paying into pension provision, that also means accepting changes in pension levels. Under-insurance leads to significant disparities in future pension levels. The YEL system must not become a whip that makes running a small-scale business alongside paid work unprofitable,” Räsänen said during the panel.

Markus Lohi takes a negative view of lowering the YEL minimum threshold.

“The threshold for starting a business must not be raised. It’s good for it to be low.”

Miko Bergbom stressed the importance of part-time entrepreneurship.

“I would be cautious here. Many people earn their main income from paid employment. If the YEL minimum threshold is removed, part-time business activity may no longer be worthwhile. Then, many business owners would stop operating.”

Jukka Kopra considers strict regulation of YEL levels a significant intrusion into entrepreneurial freedom.

“I’ve been a business owner for 26 years and know how difficult it is to determine YEL income levels. Careless action and excessive state intervention can, at worst, undermine the conditions for entrepreneurship.”

The panel also addressed the question of whether pension contributions should be paid on dividends. The panellists did not support this.

“If we go down that route, the result would be chaos. It could drive capital even further out of Finland.”

Markus Lohi believed paying pension contributions on dividends would mean that employees would also have to pay employee pension contributions on capital income.

You can watch the full panel discussion here.

Read also: How Suomen Yrittäjät would reform the pension legislation

Suomen Yrittäjät will host an online YEL information session on Thu. 11 Dec. from 15.30 to 16.30. For more information and to register, click here.

More YEL-related news can be found here.

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