Finnish pension providers have called for further reform of the country's Self-Employed Persons' Pensions Act (YEL), as legislation to overhaul the framework progresses through parliament.

Under the proposed reform, entrepreneurs could choose whether their YEL contribution basis is determined using the current assessed income model or an earnings-based model linked more closely to actual taxable income.

However, Elo CEO, Carl Pettersson, argued that the reform should be viewed as only one stage in a broader overhaul, with further questions around competition, work ability support and the long-term financing of the system still to be addressed.

Pettersson said entrepreneurs should eventually benefit from two elements already present elsewhere in Finland's earnings-related pension system: price competition between providers and work ability services.

At present, he noted, an entrepreneur's YEL contribution is effectively the same regardless of which earnings-related pension company provides the insurance, meaning differences in providers' efficiency are not reflected in the price the entrepreneur pays.

In contrast, the Employees' Pensions Act (TyEL) system already includes price competition.

Pettersson argued that extending similar competition to YEL could encourage providers to focus more closely on cost efficiency while making it clearer to entrepreneurs what they are paying for.

"In the next stages of developing the YEL system, we must ask how to extend the working careers of entrepreneurs and generally ensure that Finnish entrepreneurs can cope and feel good at work," Pettersson added.

Looking further ahead, he suggested Finland should aim to merge YEL and TyEL into a single system covering all work.

However, he stressed that this would require significant structural changes and that funding for YEL would need to begin before integration could realistically be considered.

Meanwhile, Ilmarinen welcomed the greater choice included in the current reform.

Ilmarinen director of insurance and pensions, Tiina Nurmi, said: "It is a good innovation that in the future, entrepreneurs can, if they wish, insure their pension coverage based on their earned income.

"The first steps towards an earnings-based model are a good start. Earnings-based insurance is clear, equal and flexible for entrepreneurs."

Under the proposed framework, entrepreneurs would choose between the existing overall assessment model and the new earnings-based approach.

In the overall assessment model, assessed YEL income would ultimately have to equal at least 50 per cent of taxable earned income from business activities following a transition period, starting at 30 per cent in 2028 and rising by 5 percentage points annually.

Under the earnings-based model, pension contributions would instead be determined using actual earnings information, primarily sourced from Finland's Incomes Register, or the latest completed tax period where that information is unavailable.

Entrepreneurs would generally remain with their chosen model for three years before they could reconsider the basis used to calculate their YEL income.

The proposals would also increase the scope for temporary downward flexibility in YEL contributions from 20 per cent to 25 per cent.

The Finnish government said the reform is intended to improve conditions for entrepreneurship, particularly for low- and middle-income and sole entrepreneurs, while aligning pension contributions more closely with actual income.

The reform is due to take effect in 2028, although official government material has indicated that some provisions relating to the choice of contribution basis may begin earlier to enable the new model to operate from 2028.

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