Is now the time to improve entrepreneurs’ pension security?

We at Ilmarinen engage with over a hundred entrepreneurs daily. In most cases, YEL (self-employed persons’ pension insurance) works smoothly. However, two major challenges stand out: the subjectivity in determining the YEL income and the lack of funding. These issues have also been highlighted in public discussions throughout the autumn.

The pension sector has proposed solutions for both challenges, which sound simple: moving to earnings-based YEL contributions and, in the future, setting aside a portion of the contributions in pension funds for future pensions. This would make YEL as robust as TyEL (employees' pension insurance) and strengthen entrepreneurs’ trust in the pension system.

In practice, these reforms require further analysis, compromises, and long-term commitment – but they are achievable.

Real earnings as the basis for the insurance

Entrepreneurs often find the concept of YEL income complicated and difficult to estimate accurately. There is also frustration over having to pay contributions even during periods when the business generates no income, for example due to seasonality.

Every euro earned should contribute to pension accrual. Even those running small-scale businesses deserve decent pension coverage. Many of us work both as employees and entrepreneurs over the course of our lives. Why should insuring different forms of work be treated differently when there is no need for it?

Earnings-based YEL insurance would simplify entrepreneurs’ lives in several ways:

1. Entrepreneurs would pay contributions only when income is earned, providing much-needed flexibility for business expenses.
2. The entrepreneur’s contribution and pension would be calculated from clear, reportable earnings submitted to tax authorities.
3. Income from small-scale business activities could easily be insured, just as small-scale salaried work is today.

Increasing contributions through funding

Another concern raised by entrepreneurs is intergenerational fairness. Entrepreneurs want to ensure that not all contributions go towards current pensions, but that a part is saved for their own future pension. This would strengthen confidence that everyone will receive their pension in due time. Many also wonder whether the state can continue financing an ever-growing share of pensions.

If a portion of contributions were set aside and invested in future pensions, as has been done for employees since the 1960s, the funds would grow significantly over decades. It is better to start late than never. Over time, these funds have grown large enough to cover future pension expenses.

Improvements would have been made long ago if solutions were easy. Entrepreneurs are a diverse group, and it is difficult to find a solution that works for everyone. Various options have been discussed in several working groups and are currently being analyzed in Jukka Rantala’s report, which will be completed at the end of November 2025. Solutions exist when there is will and courage to reform decisions that are over 50 years old. With these changes, entrepreneurs’ pension coverage could be made as strong as that of employees.