Finland's FSA warns of under-reporting of self-employed income

Finland’s Financial Supervisory Authority (FSA) has warned that some pension companies’ efforts to confirm self-employed customers’ earnings are not in accordance with the nation’s Entrepreneur's Pension Act (YEL).

Drawing on the findings of a thematic assessment it launched in January, the authority said it appeared that the decisions made to confirm earnings were largely in line with the entrepreneur's, or self-employed person’s, application and failed to demonstrate any case-by-case consideration.

Explaining the legislated requirements, FSA said that, at the request of the entrepreneur, the pension institution confirmed the earned income, which does not depend on what the entrepreneur receives as income from his or her company, with YEL earnings used to price the individual’s labour input and a determination must be made for each member on the basis of overall judgement.

The authority said the information provided by the pension companies gave individuals a false impression about how income from employment should be confirmed, leading some to believe that their own personal assessment of their earnings would override the pension company’s assessment.

The FSA argued that this “does not meet the requirement of the company's own discretion and thus does not meet the regulatory requirements for determining earnings”.

However, the assessment’s findings were not solely negative, as it pointed out that the training and customer materials of employment pension companies seemed appropriate.

The organisation’s assessment was launched amid concerns that earned income for insurance under YEL is often low in comparison to actual earned income and input, with average earned income of starting entrepreneurs statistically decreasing across Finland.

FSA warned: “The consequence of such a large-scale potential underinsurance situation is not only a deterioration in the social security of entrepreneurs, but also an increase in the pension contribution paid by the state.”

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