The pension system in Finland

In 2015, the pension contribution in Finland is 24% of the gross salary. The employee pays this portion in addition to the pension contribution paid by the company, but there is one big BUT:

– part of the pension contribution that the employer pays is deducted from the employee’s salary, that is, the employee actually pays a fairly large part of his pension.

– the pension contribution and the employee’s part of this contribution are mandatory. Every time a worker receives a salary, the pension-related contributions are deducted from it.

– the employee’s pension contribution is 5.7% if the employee is under 53 years of age and 7.2% if he is 53 or older.

Employees can retire from age 63 onwards. From 2017, it will increase to 65 years.

Employees will receive a pension according to how long they have worked and have made pension contributions themselves. Example:

A 35-year-old employee comes to Finland and works in a Finnish company for 5 years, full time. His salary is €2000 per month, or €24,000 per year. He pays a monthly pension contribution from his salary, which amounts to €6840 over the 5 years, or €114 every month. This payment is mandatory and will be deducted from his salary each month after the Finnish income tax has been deducted.

For each worked year, 1.5% of the employee’s yearly salary will go towards his pension. In the example above this is €360, or €30 per month. During 5 years of work, he will then receive a pension of €150 per month and will start receiving it once he has reached the age of 65.

If he works in Finland for 15 years, his pension will be 3 times higher, that is €450 per month. In Finland, the pension is taxed with income tax, which means that this amount will still be subject to income tax.

Using a rough calculation, an average person that has worked in Finland his whole life will receive 60% of his average salary as pension (40 years x 1.5% = 60%).

The table shows gross income of €2000 per month, €24,000 per year.

Age of employeeWorking time in yearsPension contributionsPension per month
3022736 €60 €
56840 €150 €
1013 680 €300 €
2027 360 €600 €
4054 720 €1200 €