How is a pension formed?

Pension cover is part of social security. That is why it is statutory.Every euro you earn increases your earnings-related pension. Pension also accrues during periods of study or on social benefits. You earn earnings-related pension when your employer takes care of your pension cover. As an entrepreneur, you take care of your own pension cover. 

Pension accrues at a specific percentage

Every euro you earn increases your pension. You earn 1.5% pension on your salary, or on your YEL income as a self-employed person. And slightly more, 1.7%, during the transition period between 2017 and 2025 if you are between the ages of 53 and 62.

Earnings-related pension accrues at a specific percentage of your salary or wages, or YEL income if you are self-employed.

The larger your salary during your career or the larger your YEL income, the bigger your pension. The length of your employment relationships is not important.

This is how you accrue pension:

Until the end of 2016 From the start of 2017
For employees and entrepreneurs:  
1.5% between the ages of 18 and 52  1.5% for employees from the age of 17 and for entrepreneurs from the age of 18
1.9% between the ages of 53 and 62

1.7% for employees and entrepreneurs aged 53–62 during the transition period, i.e. 2017–2025

4.5% between the ages of 63 and 68

1.5 % for employees and entrepreneurs. If you continue working after you have reached the lower retirement age, the increase for deferred retirement will grow your pension by 0.4%/month every month thereafter.


If you retire before you have reached the lower retirement age, the early retirement penalty will reduce your future pension payments by 0.4%/month for every month thereafter.

The amount of your pension is also impacted by the life expectancy coefficient. It reduces your pension based on your year of birth.

pension accrual between years 2005–2016

Pension accrual rate changes from the beginning of the month that follows the completion of each age:

  • 1.5 % between the ages of 18 and 52
  • 1.9 % between the ages of 53 and 62
  • 4.5 % the ages of 63 and 68

Since 2005 earnings-related pension has been accumulating from the age of 18 years (instead of 23 years as was previously). Pension does not accrue in retrospect, however. Instead, the rules apply to those who are under 23 years after year 2005.


More information

Security for five life situations

If your earnings-related pension ends up being small, you will also receive national pension or the guaranteed minimum pension. They are available from Kela. We, or another earnings-related pension insurer, will provide you with earnings-related pension. Employment abroad may affect the amount of earnings-related pension in Finland.

Pension record and pension calculator at your service

Take a look at your pension record at least once a year. It shows you which of your employment relationships have accrued pension for you and how much. If you notice a missing employment relationship, contact us so that we can straighten out the situation.

The pension calculator tells you how much your pension will continue to grow. You can also compare the size of your pension if you retire at the lower or upper old-age retirement age.

If your pension accrual is interrupted

Your career may become interrupted if you lose your work capacity. Your pension will still continue to grow.

This projected pension accrues at a specific rate per year. The accrual rate depends on when you became unable to work.

If you have been on disability pension for five calendar years, your pension is increased once at the turn of the next year. You can receive this one-time increase if you are 24–55 years of age.

The younger you were when you lost your work capacity, the larger the increase. The full increase is 25 per cent of the pension and it is granted to 24–31-year-old pension recipients. The increase is reduced by one percentage point for each year of your age. A person who is 55 years of age will still receive a one per cent increase on his or her pension. The increase percentage is defined based on what age the pension recipient is on 1 January of the increase year. You can receive a one-time increase also if you receive survivors’ pension.

The pension is increased once in this permanent manner and you are not required to apply for it separately. We will let you know the amounts of the increase and the altered total pension.

Pension for studies

You will often also accrue pension for studies. This applies when you study for a basic degree in a vocational school or university – and graduate.

As a student, your pension accrues from the age of 18.

Your pension accrues at the same rate as when you are working, i.e. 1.5 per cent per year. The percentage is calculated based on a specific amount that increases annually. In 2020, that amount is EUR 757,14 per month. Your pension accrues in this manner for a maximum of five years.

This means that each year that you study increases your monthly pension by about EUR 11. As long as you have earned at least EUR 18,171.45 (in 2020) during your career. Or if your YEL income has been at least equal to that amount if you are self-employed.

This is how you accrue pension for different degrees:


Pension accrual

Amount of monthly pension

Higher university degree 

For five years

approx. EUR 55 

Polytechnic degree 

For four years

approx. EUR 44 

Lower university degree or basic vocational degree

For three years

approx. EUR 33

If you are studying abroad for the degree and you are entitled to Kela’s financial aid for students, you still accrue pension.

If you are studying for a matriculation examination or some other general education degree, you do not accrue pension. This also applies if you are studying for your licentiate or doctor’s degree or some other post-graduate degree. Or if you become competent in a profession other than through a basic vocational degree.

Pension for social benefits

Also some social benefits can accrue your pension. This applies when you have worked for at least a short while during your life and you have earned altogether at least EUR 18,171.45 (in 2020). The social benefits will then accrue your pension at the same rate as work, i.e. 1.5 per cent annually.

The amount that the percentage is calculated from depends on what social benefit you receive. See below to check how social benefits increase your pension.


Social benefit from which pension accrues

Earnings from which pension accrues

You go on parental leave

Maternity, paternity and parental allowance

121% of the earnings on which daily allowance is   based

You become unemployed

Earnings-related daily allowance

75% of the earnings on which daily allowance is   based

You go on job alternation leave

Compensation for job alternation leave

55% of the earnings on which compensation is based

You or your child falls ill or you are involved in a   traffic or military accident or other accident

Daily sickness allowance and special care allowance

62% of the earnings on which daily allowance is   based

Your pension also grows when you go on child-care leave to care for a child under 3 years of age and do not receive daily allowance. It accrues at the same 1.5% rate as for those who receive a social benefit. The amount from which the pension is calculated is 757,14 euro/month in 2020.