Interesting times ahead for the reform of entrepreneurs’ pension security

For many people, entrepreneurship is a source of freedom and passion. Few, however, stop to consider what happens if they fall ill, take parental leave, or retire.

The Finnish Self-Employed Persons’ Pension Act, YEL, still seems to raise more questions than answers. A lack of information and the system’s complexity create ongoing challenges.

Employees’ and entrepreneurs’ pension systems have evolved at different speeds

The Employees’ Pension Act, TyEL, has been regularly updated, but YEL has remained largely unchanged since it was introduced, even though the nature of work has transformed dramatically. As a result, YEL has not kept pace with today’s working life.

Freelancing without a formal business has become more common. The new platform economy has brought new forms of work, like on-demand work. Increasingly, entrepreneurs, especially in service and expert roles, operate without employees. Many people now combine or alternate between working as an employee and an entrepreneur.

To rebuild trust in the system, YEL needs to become as reliable and well-designed as TyEL. Many entrepreneurs find the concept of YEL income (used to calculate contributions and benefits) overly complicated and rigid.

Interim findings on the YEL reform

Earlier this year, the Ministry of Social Affairs and Health appointed Jukka Rantala to assess how the entrepreneurs’ pension system should be improved. The goal is to identify problems with the current YEL income calculation, explore alternative solutions, and develop the system to ensure fairness and adequate income protection for entrepreneurs.

The work is ongoing and is scheduled for completion by November 30, 2025. At the government’s midterm budget framework talk, officials announced plans to reform the entrepreneurs’ pension system so that it’s more closely tied to actual income, with reforms expected to take effect in 2029.

The pension sector supports replacing the current calculated YEL income with a real-time, earnings-based model. The existing approach is complex and doesn’t reflect fluctuations in business activity, something entrepreneurs have repeatedly criticized. The proposed change would make income definitions simpler, more predictable, and easier to understand. Under an earnings-based model, YEL contributions would be linked directly to taxable income.

A shared goal of strengthening entrepreneurs’ safety net

Clarity and fairness are key goals for reforming YEL. Entrepreneurs form and diverse group differing in business types, industries, income patterns, workloads, and career stages. With goodwill and collaboration, it’s possible to reach a solution based on shared understanding and compromise, one that is fair and straightforward for all entrepreneurs.

We are closely following the process of the YEL reform study. We will host a webinar on the reform on December 16, once the Ministry of Social Affairs and Health has published the results of the current investigation. *This event will be held in Finnish* Sign up here

Minna Hakkarainen
Department Director, Ilmarinen