YEL reform moves forward: more choice for self-employed persons on how contributions are determined
The proposal to amend the Self-employed Persons’ Pension Act (YEL) will now proceed to Parliament. After the reform, pension contributions and pension benefits would be based either on YEL income determined much as it is today or on actual earnings.
The Act is intended to enter into force on 1 April 2028. Self-employed persons could choose the basis for their YEL income from 1 January 2028.
“It is a positive change that self-employed persons will be able to choose to base their pension provision on their actual earnings,” says Tiina Nurmi, EVP, Insurance and Pensions at Ilmarinen. “In the long term, all self-employed persons should be able to insure themselves based on earnings that is as up to date as possible. These first steps towards an earnings-based model are a good start. Basing insurance on earnings is clear, fair and flexible for self-employed persons."
Freedom of choice model to take effect in 2028
Under the new model, you could choose whether your YEL income is based on an overall assessment similar to the current approach or on your earnings. Overall assessment model: after the transition period, your calculated YEL income must be at least 50% of your earned income. The percentage would be 30% in 2028 and increase by five percentage points each year. Earnings-based model: your up-to-date earnings information would be obtained from the Incomes Register. If this information is unavailable, the earned income from your latest completed tax assessment would be used.
You could change models every three years
Whether you are required to take out YEL insurance would continue to be assessed using YEL income based on an overall assessment.
You would commit to your chosen YEL income model for three years at a time. No later than the third year after your previous YEL income decision, you would choose which model to use. At that point, the amount of your YEL income would also be updated.
Self-employed person: how the change would affect your YEL insurance
In practice, the change would give you two ways to determine the basis for your YEL insurance contributions and benefits. You could choose the option that suits you better. This would give you more freedom to decide what your YEL contribution is based on, and your contributions would better reflect your actual income level.
- Overall assessment model: your pension contribution would be based on calculated YEL income, much as it is today. Taxable earned income would also play a role. After the transition period, your YEL income must be at least 50% of the taxable earned income from your business activities. The percentage would be 30% in 2028 and increase by five percentage points each year.
- Earnings-based model: your pension contribution would be based on your actual income. The pension provider would review 12 consecutive months of earnings from the Incomes Register. If this information is unavailable, it would use the earned income from your latest completed tax assessment. If you are a new self-employed person, you would provide the pension provider with an estimate of your earnings until earnings information becomes available.
The amount of your YEL income matters because it determines your YEL contribution as well as the level of your pension and social security. Social security benefits provide support if, for example, you fall ill, take family leave, become unemployed or retire.
More flexibility in contributions
The current option to reduce the insurance contribution by 20% would be increased to 25%. This would replace the current discount for new self-employed persons. In practice, you could temporarily pay a pension contribution that is up to 25% lower. The current limit is 20%.
Read more about temporarily adjusting your YEL contribution
You do not need to do anything at this stage, and the reform does not yet affect your daily life. We will provide more information as the reform progresses, including on our YEL reform 2028 page. You can leave your contact details on the page to receive an email when the reform moves forward. This way, you will get the latest information about the changes and their impact.
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