Pricing of the expense loading in earnings-related pension contributions will change next year – as our customer you benefit from our efficiency
In the future, you will be able to compare pension companies in terms of their expense loading. Our excellent efficiency benefits our TyEL customers as lower insurance contributions.
Starting next year, the expense loading included in earnings-related pension contributions will be determined on a company-specific basis. Expense loading is the part of the pension contribution that is used to cover the pension company’s operations; in other words, the costs arising from managing insurance policies and pensions. In 2022, the expense loading has been 0.5 per cent of the payroll on average, i.e. its impact on the total earnings-related pension contribution is quite moderate.
Efficiency lowers the price of insurance
We have systematically improved our cost-effectiveness for several years now, and according to the latest financial results information, we are the most efficient pension company in Finland.* Thanks to this efficiency, our customers get expense loading at a favourable price.
The amount of expense loading that we collect is affected by the client company’s payroll and number of insured employees. The expense loading is always up to date and at the right level, which means there will be no surprises in insurance contributions later. The expense loading also does not rise as the customer relationship continues, instead the contribution is equal for all our customers.
The reason behind the change is a legislative amendment that will enter into force on 1 January 2023. The change aims for improved cost-effectiveness and greater transparency, as the contribution will be at the correct level right away.
Previously, the expense loading was the same for all earnings-related pension companies, and any surplus was refunded to customers the next year as part of their client bonuses. In the future, since each pension insurance company will collect only the required amount of expense loading, there will be no more surplus.
Strong solvency produces excellent client bonuses
As our customer, you also benefit from our excellent client bonuses, which lower the price of earnings-related pension insurance.
In the future, the amount of client bonuses will be based solely on solvency. One per cent of the pension company’s solvency capital will be credited to customers, and these bonuses will lower their pension contributions the next year.
Client bonuses will accrue under the new model starting in 2023, and they will be credited to customers’ pension contributions in 2024. The client bonuses to be refunded to customers next year will still be calculated according to the old model.
Our strong solvency is the result of long-term investment operations and good investment returns, which are the best in the sector in the long run.**
What affects the price of employer’s pension insurance?
The price of TyEL insurance is affected by
- expense loading, which is directly reflected in the amount of earnings-related pension contributions
- client bonuses, which are refunded to customers the following year.
As our customer, you will continue to benefit from our efficiency and solvency – part of our good result belongs to our customers, who are also our owners.
* Pension companies’ interim results, 30 June 2022
** Pension insurance companies' investment returns for the last 3, 5 and 10 years.
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