Pension cover based on TyEL contribution

As an employer you take care of your employees’ pension cover by paying the TyEL contribution. The contribution varies depending on how large an employer you are. And on how much discount you are given on contributions.

The TyEL contribution is a percentage of your wages and salaries. To be precise, of the wages and salaries that you pay as an employer over the course of one calendar year, i.e. from the actual payroll amount. The Ministry of Social Affairs and Health confirms the TyEL contribution annually.

TyEL insurance contribution, % of payroll

2018

2017

Average TyEL insurance contribution

24.4

24.4

Basic TyEL contribution

25.3

25.1

As an employer you do not pay the entire TyEL contribution on your own; your employees always pay a portion of it themselves. For this reason, the employer’s contribution in 2018 is 17.75 per cent on average.

Five factors affecting TyEL contributions

You pay the entire TyEL contribution beforehand, as an advance payment. The size of your contribution depends on your TyEL contribution percentage. The percentage is affected by two things: how large an employer you are and how big a client bonus you receive.

  • In pension matters the size of the employer is determined based on the actual payroll amount. If the payroll amount is large, approximately EUR 2 million, you are a large employer. Your TyEL contribution is then affected by the contribution category in addition to the contribution percentage. The contribution based on the contribution category is the disability pension contribution that funds the disability pensions of your employees. That is why taking care of the well-being of your employees is worthwhile.
  • The client bonus is a bonus that decreases you contribution. You always receive a client bonus from us when the return on our investment activities and our solvency allow it. Usually they do.
  • Three other things affect the TyEL contribution. Firstly, the payroll, once again. As a large employer you receive a premium loss discount. And a discount for large payrolls when your payroll amount is at least EUR 5 million.
  • Your contribution is also affected by how often you pay it. And at what time of the year.

 

This only applies to contract employers. If you are a temporary employer, you need to arrange for your employees’ pension cover in a different way, and much more simply.

Components of the TyEL contribution percentage

The average TyEL contribution percentage consists of six components. Two of them are used to collect funds for financing future old-age and disability pensions. The largest component is the pooled component that is used to fund survivors’ pensions and the index increments of all pensions. The remaining components are used for managing pensions and covering premium losses. The client bonus is a discount given to customers by pension companies, which reduces the contribution.

Components of the average TyEL contribution percentage, % of payroll

 

  2018

 2017

Old-age pension

   3.50

   3.50

Disability pension

   1.00

   0.90

Pooled component

 19.80

 19.70

Other components

   0.80

   0.80

Client bonus, i.e. discount

 - 0.70

 - 0.50

Average TyEL insurance contribution

 24.40

 24.40

The employee’s pension insurance contribution as of 1 January 2017 is equal in size in all of the age groups. However, during the transition period up to the end of 2025, the employee’s contribution between the ages of 53 and 62 is higher than for the other age groups. This is due to the larger pension accrual during the transition period. The larger contribution is applied from the beginning of the next month in which the employee turns 53 years to the end of the month in which she or he turns 63.

Employee contribution, % of pay

2018

2017

Employee between 17 and 52 years of age

6.35

6.15

Employee between 53 and 62 years of age

7.85

7.65

Employee between 63 and 67 years of age

6.35

6.15

Deduct the employee contribution from his or her pay and pay it to us. Even when he or she receives pension in addition to the pay. Also deduct the employee contribution when you have taken out a voluntary TyEL insurance for employment abroad or for compensations regarding positions of trust. Or if you have taken out a voluntary TyEL insurance and his or her pay falls below the lower limit for TyEL. In 2018 that lower limit is EUR 58.27 per month.

Ilmarinen has investment assets of more than EUR 30 billion to cover pensions. This guarantees that you and other Finns will receive your pensions, whatever the times. We use a buffer as added security to maintain our solvency regardless of the market situation.

When you receive a client bonus you simultaneously receive news concerning two issues: that our solvency remained strong and that our investment activities were successful. So successful that the investment returns covered all of the costs resulting from investments. And that the return is enough to cover current and future pensions.

Our customers receive the returns.

The client bonus is a deduction in the TyEL contribution that reduces the TyEL contribution for one calendar year for you and other contract employers. The client bonus reduces TyEL contributions for 2018 by an average of 0.7 per cent.

The bonus you receive is dependent on three things. Firstly, whether you are a contract employer or temporary employer. Contract employers of all sizes receive the client bonus but temporary employers do not. Secondly, the client bonus is affected by how much you paid in advance TyEL contributions during the year in question. Thirdly, the bonus is affected by how large the pension liabilities related to your employees were at the end of the previous year. Pension liabilities mean the pensions of your employees for which Ilmarinen is responsible. The larger an employer you are and the longer your TyEL insurance has been with Ilmarinen, the larger the pension liabilities.

You benefit from the client bonus already when paying the TyEL contribution as the provisional client bonus reduces your advance contribution. Your final client bonus is determined once our financial statements are completed, which takes place at the start of the following calendar year.

The client bonus begins to apply to you from the very first day that your TyEL insurance begins with Ilmarinen. You will receive your first bonus during your second insurance year. You will receive the bonus even if you transfer to another insurance company. If you have accumulated at least EUR 50,000 in pension liabilities you will receive client bonuses for at most three years from the transfer of the insurance.

Your size as a contract employer impacts your TyEL contribution. The size of a temporary employer makes no difference to the contribution as the temporary employer only pays the basic TyEL contribution.

The payroll amount determines whether a contract employer is small or large. The payroll amount under scrutiny varies annually, as does which year’s payroll is used. Your size in 2018 is determined by your 2016 payroll. If your payroll was less than EUR 2,059,500, you are a small employer and if it was at least that amount you are considered a large employer.

As a small employer you always pay the basic TyEL contribution. As a large employer you belong to a contribution category. The contribution category impacts the size of your TyEL contribution.

The contribution based on the contribution category is the disability pension contribution. It funds the disability pensions and partial disability pensions of the employees of large employers. The size of the disability pension contribution depends on two things, the payroll and which contribution category you belong to. The amount of disability and partial disability pension granted to your employees, in turn, decides the contribution category.

There are eleven contribution categories. If you belong to the lowest contribution category you pay the least amount of disability pension contributions and if you belong to the largest category you pay the most. You belong to the lowest contribution category when your employees have been granted few disability pensions and partial disability pensions during two calendar years. Your disability pension insurance contributions for 2018 are determined based on the pensions that your employees have been granted in 2015 and 2016. Mergers and acquisitions also impact the contribution category.

Here you can see the size of your disability pension contribution when your payroll amount is EUR 5 million or more. If your payroll is smaller or if you wish to read more about the contribution categories, take a look at our brochure TyEL Insurance Contribution for Large Business.

 

Disability pension contribution, euros per year and % of payroll

Payroll

MEUR 5

MEUR 15

MEUR 60

Contribution category

Contribution, EUR

Contribution, %

Contribution, EUR

Contribution, %

Contribution, EUR

Contribution, %

11

71,000

1.4

433,000

2.9

3,300,000

5.5

10

67,000

1.3

370,000

2.5

2,700,000

4.5

9

62,000

1.2

307,000

2.0

2,100,000

3.5

8

58,000

1,2

260,000

1.7

1,650,000

2.8

7

56,000

1.1

229,000

1.5

1,350,000

2.3

6

54,000

1,1

197,000

1.3

1,050,000

1.8

5

52,000

1.0

172,000

1.1

   810,000

1.4

Base   category 4

50,000

1.0

150,000

1.0

   600,000

1.0

3

48,000

1.0

128,000

0.9

   390,000

0.7

2

47,000

0.9

109,000

0.7

   210,000

0.4

1

46,000

0.9

  93,000

0.6

     60,000

0.1

 

We will let you know at the end of each calendar year which contribution category your organisation will belong to the next year. This enables you to know what sort of disability pension contribution you need to be prepared for. If you wish to receive an estimate before then, call us. The estimate is free of charge. Our customer service can be contacted at +358 10 284 3714.

If your contribution category is causing you concern think about what you could do to improve the well-being of your employees. We will gladly assist you. Ilmarinen’s well-being at work tools are at your disposal. Pick them up – everyone wins.

Read more about better working life with Ilmarinen

As an employer you decide how often you pay TyEL contributions. And at what time of the year. Select the number of instalments and the due date carefully as they impact your TyEL contribution. This is because we calculate the interest rate for your TyEL contribution from the first of July to the due date of your TyEL contribution. As the interest rate in the calculations is used the premium interest rate.

Therefore those who pay their contributions in one instalment in January pay the least. And those who pay their contributions at the end of the year pay the most. You can view your final TyEL contribution situation in the spring once we complete the annual calculation.

The premiun interest rate is revised twice a year.

Interest rate, % of contributions

 

2018

2017

Premium interest rate

1 Jan. – 30 June

2.00

2.00

 

1 July – 31 Dec.

 

2.00

  

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