Pension cover from Finland or from abroad?

Employers insure their employees and entrepreneurs insure themselves. That also applies outside Finland’s borders. And when your earnings-related pension insurance matters are in order, you accrue pension for work carried out abroad as well.

As an employer you arrange your employee’s pension cover (pdf brochure in Finnish) and as an entrepreneur, your own (the brochure is available only in Finnish). You always arrange it in a country, either in Finland or the country of employment. Generally in one or the other; sometimes in both.

The country in which you arrange pension cover depends on two things: posting and the country of employment.

Posted or non-posted?

An employer posts his or her employee abroad, a self-employed person him- or herself. There are two criteria to be met by a posted employee or entrepreneur. The work must be temporary. An employee must have an employment relationship with a Finnish employer for the entire duration of his or her posting abroad. An entrepreneur must maintain the condition of his or her activities in Finland at a level that will enable them to be continued upon his or her return.

A posted employee’s and entrepreneur’s pension cover is sometimes arranged in Finland, sometimes in the country of employment. It depends on whether the employee or entrepreneur works in an EU or EEA country, Switzerland, a social security agreement country or a non-agreement country.

On the other hand, the pension cover of a non-posted person is always arranged in the country of employment.

When in Rome...

When the pension cover is retained in Finland, you take out TyEL insurance for your employees and YEL insurance for yourself. If the pension cover is to be arranged in the country of employment, you, as an employer, insure your employees; and as an entrepreneur, you insure yourself, in accordance with the practices in place in the country of employment.

Sometimes pension cover is arranged in both Finland and the country of employment. This is the case practically always when the country of employment is a non-agreement country. In that case you insure your employees or yourself in both countries.

Pension cover goes hand in hand with other social security benefits. That is why employees and employers are usually covered by the social security system of the country in which their pension cover is provided. But social security is not provided automatically; it must be applied for.

Apply for pension from Finland or the country of employment

Work abroad always accrues pension. Pension accrues according to the practices in place in the country in which your pension cover is provided. However, the right place for you to apply for pension is often Finland.

Mobility is made easy in Europe. That is why many employees and self-employed persons go work in an EU or EEA country or Switzerland. 

When you, as an employer, post your employee, and as a self-employed person, yourself, to these countries, you must follow EU regulations. That means that the pension cover and other social security benefits of the employee and self-employed person are retained in Finland for 2 years. You only need to do one thing: apply for a certificate of posting for an employee or self-employed person. An employer applies for the certificate for his or her employees and a self-employed person for him- or herself. If the work abroad lasts less than a month, you do not need to do anything, because a period as short as that is considered a business trip. 

Once you have received the certificate you know that the pension cover will be retained in Finland. In that case you only need to maintain your employee’s TyEL insurance if you are an employer and your YEL insurance if you are self-employed. 

You will need the certificate in the country of employment. It proves that your pension cover and other social security benefits are taken care of in Finland. That means they do not need to be arranged in the country of employment. And that means you will avoid paying paying pension and other social security contributions twice. 

If you know, when leaving Finland, that your work abroad will last more than 2 years, mention it when applying for the certificate. If you do not mention it and your work abroad lasts more than 2 years, no worries. In that case, you can apply for an exemption. An employer applies for the exemption for his or her employees and a self-employed person for him- or herself. That way the pension cover and other social security benefits can be retained in Finland for a maximum of 5 years. If your work abroad lasts even longer, your right to pension cover and other social security benefits will transfer to the country of employment. You should then arrange the matter in accordance with the practices in place in the country of employment. 

The decision on retaining your pension cover and other social security benefits in Finland is made by the Finnish Centre for Pensions.When you apply for retaining your cover for a maximum of 2 years, the Finnish Centre for Pensions will make the decision alone and for periods longer than that, together with the country of employment. In addition to you, the Finnish Centre for Pensions will deliver the decision to all parties concerned: Kela, us at Ilmarinen, your accident insurance company and your employee. 

If you or your employee work in several countries during one posting, call us. Our customer service can be contacted at +358 10 284 3714.

EU countries are Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the UK. EEA countries are Norway, Iceland and Liechtenstein.

Many people also go work outside Europe. To make arranging pension cover and other social security benefits easy, Finland has concluded a social security agreement with six countries and one province. 

The contents of these agreements vary. What they have in common is that they allow for an employee to retain his or her pension cover in Finland for 3–5 years. An entrepreneur’s pension cover, on the other hand, can immediately transfer to the country of employment. 

When you wish to retain your employee’s pension cover in Finland, you only need to do one thing: apply for a certificate of posting for an employee. At the same time, you are applying for retention of your right to other social security benefits as well, if this is allowed under the social security agreement concluded with the country of employment. If the work abroad lasts less than a month, you do not need to do anything, because a period as short as that is considered a business trip. 

Once you have received the certificate you know that your employee’s pension cover and perhaps also other social security benefits will be retained in Finland for 3–5 years, provided that you maintain your employee’s TyEL insurance in force for that same period. The exact time period is stated in the agreement concluded with the country of employment. 

You will need the certificate in the country of employment. It proves that your pension cover and possibly also other social security benefits are taken care of in Finland. That means they do not need to be arranged in the country of employment. And that means you will avoid paying pension contributions and often also other social security contributions twice. 

If the posting abroad lasts more than what is stated in the social security agreement but at maximum 5 years, apply for an exemption. The exemption will allow you to retain your pension cover and possibly also other social security benefits in Finland for a maximum of 5 years. If your posting lasts even longer, your pension cover and other social security benefits will transfer to the country of employment. You should then arrange the matter in accordance with the practices in place in the country of employment. 

The decision on retaining your pension cover in Finland is made by the Finnish Centre for Pensions and the decision on retaining other social security benefits in the country is made by Kela. In addition to you, the Finnish Centre for Pensions will deliver its decision to all parties concerned: Kela, us at Ilmarinen, your accident insurance company and your employee. 

If you are an entrepreneur, call us so that we can figure out together how you can arrange your pension cover in a social security agreement country. If you are an employer, call us whenever you need any additional information. Our customer service can be contacted at +358 10 284 3714. 

The social security agreement countries are Australia, Canada, Chile, China (1.2.2017) India, Israel, the Province of Quebec (Canada), South Korea (1.2.2017) and the United States.

When posting your employee to a non-agreement country, maintain his or her TyEL insurance in force. Thanks to it, your employee will retain his or her right to pension cover in Finland as long as he or she has an employment relationship with a Finnish employer. It makes no difference what the extent of the posting is. 

On the other hand, your employee’s right to other social security benefits will be automatically retained in Finland for only one year. If you want it to be retained longer, contact Kela and ask your employee to do the same. That means that you can retain your right to other social security benefits in Finland for a maximum of 10 years. 

If you are self-employed, your pension cover will be retained in Finland for a year, provided that you maintain your YEL insurance in force. And provided additionally that 

  1. you had taken out YEL insurance at least 4 months before going abroad
  2. you have worked as a self-employed person in Finland for at least 4 months before going abroad
  3. your or your company’s domicile is in Finland
  4. you intend to return to Finland.

If you fail to meet one of these four conditions, arrange your pension cover in the country of employment as of the start of your work abroad. If you also wish to retain your right to other social security benefits under the Finnish system, notify Kela that you are moving abroad. You will then retain your right to them in Finland for as long as you retain your right to pension cover, i.e. a year. 

Non-agreement countries are Russia, and all countries other than social security countries, EU or EEA countries or Switzerland.

Agree with your employee on the pensionable earnings at the start of the posting. Pensionable earnings means a salary that your employee would earn for a similar job in Finland. In general, it equals the salary that he or she is paid before the posting. TyEL contributions and pension accrual for work abroad are based on the pensionable earnings. 

Include the salary in the posting agreement. The pensionable earnings stay the same throughout the posting. When agreeing on it, make sure it includes holiday bonuses, fringe benefits and other possible bonuses. However, adjust the pensionable earnings if the work performed during posting changes materially. And when a general pay increase is taking place in Finland. Inform us of the new pensionable earnings when submitting your normal annual TyEL notification.

When transferring to the country of employment, your employee’s pension cover may weaken. In that case you can supplement the pension cover with voluntary TyEL insurance. Through it you can raise the pension cover to the same level as in Finland. 

You may take out voluntary insurance when you cannot insure your employee under the regular i.e. statutory TyEL insurance. And when your employee is covered under the Finnish social security system when you are taking out the insurance. 

That is often the case when, for example, your employee’s employment relationship with a Finnish posting company ends and he or she transfers to a local contract. Or when he or she joins a foreign company or a Finnish company’s subsidiary or sister company. Or when you recruit a Finnish or foreign employee on site and wish to take care of his or her pension cover. 

The contributions for the voluntary TyEL insurance are based on the pensionable earnings just as in the case of regular TyEL insurance. However, you should consider how much your employee accrues pension from working abroad when determining the pensionable earnings. Voluntary TyEL contributions are also paid by both the employer and the employee. As an employer you need to deduct your employee’s share of the contribution from his or her pay and then pay it to us as usual. 

When you wish to take out voluntary TyEL insurance or discuss it, call us. Our customer service can be contacted at +358 10 284 3714.

Earnings-related pension accrues for all the work that you perform, usually also for work performed abroad. Pension accrues according to the practices in place in the country where your pension cover is provided while you are working abroad. 

If you have a right to pension cover in Finland while you are working abroad, you accrue pension normally, i.e. according to the practices in place in Finland. On the other hand, if you have a right to pension cover in the country of employment, you accrue pension according to the practices in place in the country of employment. If you wish to find out how much pension you have accrued in the country of employment, turn to the country of employment for advice. 

The pension that you have earned from working abroad is always paid to you to Finland – except if you worked in a non-agreement country. All countries of employment do not pay pensions outside their national borders. That is why it is advisable to find out about the practices of the country of employment beforehand. It is also advisable to find out beforehand about the taxation of work performed abroad

When it is time for you to retire, apply for pension either from Finland or from the country of employment, depending on your place of residence at the moment when you apply for pension and the country in which you worked. 

If you live in Finland or another EU or EEA country, Switzerland or a social security agreement country, proceed as follows:

  1. When applying for pension for work carried out in an EU or EEA country, Switzerland or a social security agreement country, apply for pension from your country of residence.
  2. When applying for pension for work carried out in a non-agreement country, apply for pension from the country of employment. 

If you live in a non-agreement country, proceed as follows:

  1. When applying for pension for work carried out in Finland, apply for pension from Finland.
  2. When applying for pension for work carried out in another country, apply for pension in accordance with the practices in place in your country of residence. 

When applying for pension for work carried out abroad from Finland, fill in a normal Finnish pension application. Attach a U form to your application to provide information about your work abroad. Also attach any possible certificates for work performed abroad. Send the application with its attachments to the Finnish Centre for Pensions or to us. We will apply for the pension from abroad on your behalf.