General

The Finnish social security system consists of benefits based on residence and employment. All persons permanently resident in Finland are covered for pensions, healthcare services and health insurance, parental allowances and family benefits. Further conditions are attached to the award of some benefits to persons resident in the country, relating mainly to duration of residence. The earnings-related pension scheme and accident and occupational disease insurance are areas of social security based exclusively on employment.

The Finnish statutory pension system consists of an earnings-related pension and national pension. Disability, survivors’ and old age pensions are benefits under these schemes.

The purpose of an earnings-related pension is to maintain the living standard which a person in paid employment or self employed enjoyed while he or she was working. The earnings-related pension scheme is based on a number of different Acts, the main one being the Employees’ Pensions Act (TyEL). Self employed persons, seamen and civil servants have their own pension laws.

The award of a national pension is based on residence in Finland. It guarantees a minimum subsistence income for a pensioner who has no other pension or whose other pension cover is small. The national pension rate is reduced when the earnings-related pension income increases, and no national pension is payable when the earnings-related pensions exceed a certain amount.

There are relatively few voluntary supplementary pension schemes in Finland as all wage/salary earners and self employed persons fall within the scope of the earnings-related pension scheme. There is no upper limit for pensionable income under the earnings-related pension scheme and no upper limit for the amount of the pension.

The Ministry of Social Affairs and Health is responsible for social security legislation and general development of the social security system. The system is run by a variety of organisations. A particular feature of the social insurance system is that some aspects of it are handled by private insurance companies.

The social security benefits based on residence are administered by the Social Insurance Institution (Kela). It is an autonomous body under public law supervised by the Finnish Parliament. Local authorities are responsible for health care services.

The earnings-related pension insurance for private sector employees is handled by pension insurance companies, pension funds and pension foundations. The Finnish Centre for Pensions (ETK) is the coordinating agency for the earnings-related pension insurance scheme. International pension and insurance matters also fall within its jurisdiction. Insurance and pension institutions are supervised by the Insurance Supervisory Authority.

The pension schemes of State employees are administered by the State Treasury and those of local authority employees by the Local Government Pensions Institution.

The accident insurance institutions are responsible for the accident and occupational disease insurance of private sector employees. The State Treasury administers the accident insurance of State employees. The Federation of Accident Insurance Institutions is the umbrella organisation. Its functions include acting as the institution of the place of residence or place of stay, in accordance with Finland’s international obligations.

The Social Insurance Institution is responsible for basic unemployment provision. Unemployment funds, working in conjunction with trade unions, are in general responsible for the administration of earnings related unemployment benefits. Membership of such funds is voluntary.

A person obtains decisions relating to social security in writing, and if the person is dissatisfied with a decision, he or she may appeal against it. The appeal procedure and appeal authorities for the various benefits are set out below.

Financing

The State finances, as a rule, the basic security benefits, and the earnings-related security is financed through employers’ and employees’ insurance contributions.

The State finances family benefits, housing allowances and disability allowances. The basic unemployment allowances are mainly financed by the State. Furthermore, the return on the unemployment insurance contributions paid by persons who are not members of unemployment funds is used for financing basic unemployment allowances. The labour market support is funded by the State and the local authorities.

Earnings related unemployment benefits are financed through the unemployment insurance contributions of employers and employees, the unemployment funds’ membership payments and government funding.

The local authorities finance healthcare services through local taxation and fees paid by clients. In addition, the government pays the local authorities central government transfers for the funding of social and health services.

Earnings-related pensions are financed through the insurance contributions of employers and employees. The State contributes to the financing of self-employed persons’, farmers’ and seamen’s pensions. National pensions are financed through the employers’ insurance contributions and State funding. Health insurance is financed in regard to daily allowance benefits by the employees, self-employed persons and employers, and in regard to medical expenses insurance by the insured persons and the State. Accident insurance is based on employers’ contributions.

Characteristics of the Social Security System in Finland. Helsinki 2007
Ministry of Social Affairs and Health's brochures 2007:9eng
ISSN 1236-2123
ISBN 978-952-00-2418-5 (pb), 978-952-00-2419-2 (PDF)