SY slams Helsingin Sanomat YEL editorial

On Thu. 12 Dec., the newspaper Helsingin Sanomat stunned the business field with its editorial. On the reform of the Entrepreneur’s Pension Act (YEL), HS wrote that “entrepreneurs are saddling others with the cost of their own pensions”.

Next year, the state will contribute just under €600 million towards entrepreneurs’ pension. Mikael Pentikäinen, the CEO of Suomen Yrittäjät, the Finnish SME association, says the growth of the state contribution is not the fault of current business owners.

“Based on the feedback I received this morning from business owners, the piece has offended many. The entrepreneurs’ pension system dates back 55 years, when a large share of today’s business owners had not even been born. It is not the fault of today’s business owners that no pre-funding was created for the entrepreneurs’ pension system at the time. Past mistakes cannot be the responsibility of today’s business owners,” Pentikäinen says.

The same shock is also visible in business owners’ social media posts.

“I recommend looking at companies’ profit and loss statements to see how much tax and tax-like charges business owners pay. They contribute significantly to financing society,” Pentikäinen says.

Minister of Social Security Sanni Grahn-Laasonen has also stressed that today’s business owners are not to blame for the situation.

“Current business owners are not to blame for the growing state contributions. The reasons are the lack of pre-funding and an ageing population,” the minister told HS last week.

Pentikäinen says the pension level of retired business owners is based on the pension contributions they paid during their careers.

“A business owner’s pension level is usually markedly lower than that of an employee.”

More retirees

Pentikäinen says the reason the pension contributions of today’s business owners are not enough to cover the pensions of retired business owners, and for the increased state contribution, lies elsewhere than with today’s business owners.

“Entrepreneurs’ pensions were not pre-funded in the 1970s, when the current YEL system was introduced.”

In addition to the lack of pre-funding, he also points to demographic structure.

“The number of retired business owners has significantly outstripped the number of active business owners insured under YEL, which has remained unchanged in recent years. The deficit has also grown because pensions have received significant index increases in recent years. In addition, it is worth remembering that there are more working employees than retired employees, whereas for business owners the situation is the opposite.”

At the same time, the farmers’ pension system is even more in deficit than the YEL system.

“The share of active farmers is considerably smaller than retired farmers. This is due to a change in the structure of the economy. It would be unreasonable to make only active farmers pay the pensions of retired farmers.”

“Can’t afford to pay”

Pentikäinen also raises the issue of improving the efficiency of the pension system.

“We have very high non-wage labour costs and, as a result, a high tax wedge, which in turn contributes to the fact that business owners can’t afford to pay themselves higher pension contributions. We also need to understand business owners’ situation. A fifth are facing payment difficulties, bankruptcies are at a record level this century, the economy is in recession, and business owners’ costs have risen due to the inflation spike.”

Pentikäinen says many business owners simply do not have the ability to pay. Suomen Yrittäjät has criticized the report by YEL rapporteur Jukka Rantala on the grounds that its proposals would widely raise pension contributions, and would sharply raise contributions in particular for those running small businesses.

“Rantala’s proposals would lead to many entrepreneurs having to quit, and entrepreneurial activity would no longer be worth doing,” Pentikäinen says.

Read more YEL-related news here.

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