History of the earnings-related pension system
The earnings-related pension system was set up at the turn of the 1950s and 1960s. The first group, which received its own pension act, were seafarers. The Seafarer’s Pensions Act came into force in 1956. The current form of earnings-related pension system was created mainly in the 1960s.
Based on legislative motions presented by Members of Parliament, the Employees’ Pensions Act was submitted to the Parliament of Finland for debate in 1961. According to the Act, employment had to last at least six months before the employee accrued pension. However, the Labour Affairs Committee of Parliament called for the Government to investigate the possibilities of creating a pension scheme that would also cover sectors where work was seasonal and usually lasted less than six months. Such sectors included building, forestry and log floating, and dock work.
The Minister of Social Affairs appointed the Seasonal Workers’ Pension Committee in June 1961. In September, the committee submitted a proposal for the Temporary Employees’ Pensions Act.
The President of the Republic ratified the Employees’ Pensions Act (TEL) on 8 July 1961. The Temporary Employees’ Pensions Act (LEL) was ratified on 9 February 1962. Both Acts entered into force simultaneously on 1 July 1962.
Development of the earnings-related pension system
When passing the Acts, Parliament required that the Government monitor the development of pension provision and correct the situation if it is discovered that some employee groups fall outside pension provision. As a result, pension provision was developed actively in the coming years and decades.
For instance, the following years are important for the earnings-related pension system:
- 1956 Sefarer’s Pensions Act MEL
- 1962 Employees’ Pensions Act TEL
- 1962 Temporary Employees’ Pensions Act LEL
- 1964 Local Government Employees’ Pensions Act KVTL
- 1966 Evangelical Lutheran Church Pensions Act KiEL
- 1967 State Employees’ Pensions Act VEL
- 1967 Survivors’ Pensions Act
- 1970 Self-Employed Persons’ Pensions Act YEL and Farmers’ Pensions Act MYEL
- 1971 Unemployment Pensions Act
- 1975 General increase: the annual accrual rate was raised from 1% to 1.5%
- 1986 Pensions Act for Performing Artists and Certain Groups of Employees TaEL
- 1990 Widowers were also entitled to survivors’ pension; reduction of the surviving spouse’s pension
- 1993 Employees’ earnings-related pension contribution
- 2003 Local Government Pensions Act KuEL
- 2005 Pension reform
- 2007 Employees Pensions Act TyEL (combining TEL, LEL and TaEL)
- 2007 State Employees’ Pensions Act VaEL
- 2007 Employees Pensions Act TyEL
- 2009 Pension provision for grant-holders (part of MYEL)
- 2016 Reform of the Sefarer’s Pensions Act MEL
- 2017 Pension reform
From the start, the legislation on earnings-related pensions has been developed in cooperation between employers’ and employees’ organizations and the State. Both employees and employers pay for pensions. It has therefore been considered justified that they also participate in the decision-making concerning the system. This tripartite preparation and decision-making is still in use today.
More information about the pension reforms can be found from the website of Finnish Centre for Pensions.