Different types of pension providers

Finnish earnings-related pension system has a decentralized administration. This means that there are many earnings-related pension providers of different types.

Earnings-related pension insurers are responsible for managing the statutory earnings-related pension insurance included in social security. Their operations are regulated mainly through national legislation. Because the types of operations differ from each other, there are also differences in the legal instruments regulating operations. However, pension benefits are always determined on the basis of the relevant legislation regardless of the institution that provides each individual’s pension insurance.

This page describes the characteristic features of each pension insurer type. The governance of each pension insurer type is explained in greater detail on the page Governance of pension providers.

Private-sector pension providers

In private sectors, earnings-related pensions are provided by pension insurance companies, company pension funds and industry-wide pension funds, which are governed by private law. When taking out earnings-related pension insurance for their employees, employers can select the pension provider of their choice. Alternatively, employers can set up their own company pension fund or industry-wide pension fund if the conditions for its establishment are met.

Seafarers and farmers have their own separate pension insurers.

Industry-wide pension funds

An industry-wide pension fund is responsible for the pension provision of people working for one employer, a group of companies or for employers operating in the same sector. The fund may also manage the pension provision of self-employed persons. Industry-wide pension funds may not engage in any other insurance business.

In addition to statutory pension provision, an industry-wide pension fund that has launched operations before 2022 can also provide voluntary supplementary pensions. Supplementary pensions provided by an industry-wide pension fund are paid for by the employer alone or employer and employee together.

The establishment of an industry-wide pension fund requires that at least 150 people are insured through the fund. Instead, it does not require a proper permit from the authorities. However, approval for the by-laws of the fund, and for any amendments to the by-laws, must be sought from the Financial Supervisory Authority, and the fund must be reported for registration in the company pension fund and insurance fund register within the prescribed time. When approving the by-laws of an industry-wide pension fund, the Financial Supervisory Authority assesses the fund’s ability to meet its obligations.

A new industry-wide pension fund can also be established by transferring an insurance portfolio from a pension insurance company to the new fund.

There are four industry-wide pension funds that manage statutory earnings-related pension provision (situation at the end of 2023). The activities of industry-wide pension funds are regulated by the Act on Company Pension Funds and Industry-wide Pension Funds.

Company pension funds

A company pension fund manages the pension provision of employees working for one or more employers or a group of companies (sphere of operations). Apart from pension insurance, company pension funds may not engage in any other insurance business.

In addition to statutory pension provision, company pension funds that have launched operations before 2022 can also provide voluntary supplementary pensions. Supplementary pensions provided by a company pension fund are paid for by the employer alone.

The establishment of a company pension fund requires that at least 150 people are insured through the fund. No authorization as such is needed instead. However, approval by the Financial Supervisory Authority must be sought for the by-laws of a company pension fund and for any amendments to the by-laws. In addition, the fund must be reported for registration in the company pension fund and insurance fund register within the prescribed time.

A new company pension fund can also be established by transferring an insurance portfolio from a pension insurance company to the new fund.

There are seven company pension funds that manage statutory earnings-related pension provision (situation at the end of 2023). The activities of company pension funds are regulated by the Act on Company Pension Funds and Industry-wide Pension Funds.

Pension insurance companies

Pension insurance companies manage statutory pension provision for private-sector employees and self-employed persons. Pension insurance companies may not engage in any other insurance business. The assets and investments of a pension insurance company must therefore be kept separate from the assets and investments of any other company that may belong to the same group of companies as the pension insurance company.

Pension insurance companies must receive authorization from the Government for starting their operations. The authorization is valid in Finland. The Ministry of Social Affairs and Health must request an opinion from the Financial Supervisory Authority for an application concerning a new authorization or extension of an existing authorization.

In addition to the authorization, the establishment of a pension insurance company requires that the preconditions provided by law are met. A pension insurance company must have an initial capital of at least five million euros. Also a pension insurance company’s articles of association and any amendments to them must be confirmed by the Financial Supervisory Authority.

As to its legal form, a pension insurance company can be either a mutual insurance company or a limited liability company. The main difference between the company forms is how company ownership is defined.

• A mutual insurance company is owned by the policyholders, i.e. the employers and self employed persons, and the insured, i.e. the employees. The holders of any guarantee shares may also be shareholders in a mutual insurance company.
• A pension insurance company organized as a limited liability company is owned by its shareholders. In general, this means the various foundations and organizations that have invested equity in the company.

There are a total of four pension insurance companies: Elo, Ilmarinen, Varma and Veritas. Of these, Veritas is limited liability company and the other three of them are mutual insurance companies.

The activities of earnings-related pension insurance companies are regulated by the Act on Earnings-Related Pension Insurance Companies and the Act on Insurance Companies.

Earnings-related pension insurance operations are also open for competition from abroad. Because one of the basic tenets of the EU is the free movement of goods and services, insurance undertakings are entitled to carry out their business anywhere in the EU. Thus, foreign operators may come to Finland and establish an earnings-related pension insurance company here, or acquire a company that is already in business here.

Foreign operators are subject to the same restrictions regarding their line of business and concessions as pension insurance companies established by Finnish operators. All companies engaged in statutory earnings-related pension insurance in Finland must have their head office in Finland. Supervision is also in the hands of Finnish authorities. So far, no foreign operator has engaged in the earnings-related pension insurance business in Finland .

The Farmers’ Social Insurance Institution

The Farmers’ Social Insurance Institution (Mela) handles the statutory earnings-related pension coverage and other social insurance schemes for farmers, forest owners, fishermen and reindeer breeders, as well as for recipients of grants and scholarships.

In addition to earnings-related pension provision, Mela implements

• the accident insurance system for agricultural entrepreneurs and grant/scholarship recipients;
• the group life insurance system;
• the sickness daily allowance system of Mela; and
• the farmers’ early retirement aid system.

Mela also administers the holiday and stand-in scheme for agricultural entrepreneurs and fur farmers, and is responsible for providing advice and information about agricultural entrepreneurs’ occupational safety issues.

The Farmers’ Pensions Act contains provisions on Mela and its tasks.

The Seafarers’ Pension Fund

The Seafarers’ Pension Fund manages earnings-related pension provision for seafarers. In accordance with the Seafarers’ Pensions Act, the Seafarers’ Pension Fund is responsible for pension provision for seafarers working on board Finnish merchant vessels in international traffic and on ice breakers.

The operations and governance of the Seafarers’ Pension Fund are regulated by the Seafarers’ Pensions Act.

Public-sector pension providers

Keva

Keva manages pension provision for persons employed by municipalities, wellbeing services counties, the State and the Evangelical Lutheran Church. In addition, Keva implements the employment-related pension schemes of the Social Insurance Institution’s personnel and of the Bank of Finland’s personnel. However, Keva’s role varies when it comes to the funding of pensions.

In the case of municipal and wellbeing services counties employees, i.e. Keva’s member organizations, Keva is responsible for both pension provision and its funding. All Finnish cities, municipalities and joint municipal boards, most municipal associations and limited liability companies, as well as wellbeing services counties are members of Keva.

Services to other employers are restricted to the payment of pensions. Other actors responsible for the financing of pensions and the investment of pension assets are the State Pension Fund, Church Pension Fund, Kela and the Bank of Finland. These are described in more detail on the page Other actors involved in the financing of pensions.

Keva’s operations are based on the Public Sector Pensions Act and the Keva Act.

Other pension insurers

In addition to the above earnings-related pension insurers, the Government of Åland and the employees of the Finnish Orthodox Church have their own pension providers.

The Pensions Office in the Finance Department of the Government of Åland is mainly responsible for the earnings-related pensions of the personnel working for the Government of Åland.

The Central Fund of the Finnish Orthodox Church is responsible for the implementation of pension provision for the employees of the Orthodox Church.

Other actors involved in the financing of pensions

In addition to pension providers proper, a number of actors participates in the investment of pension assets and in the financing of earnings-related pensions for certain groups of employees.

The State Pension Fund is a fund outside the State Budget that was founded in 1990. It is responsible for investing the State’s pension assets and for placing them into funds. However, the State Pension Fund does not pay pensions directly. Instead, all pensions in the State pension system are paid from appropriations reserved in the State Budget annually. Each year, the State Pension Fund transfers a sum to the State Budget. This sum corresponded to 40 per cent of the annual pension expenditure in 2023. During the years 2024-2028, the budget transfer will increase annually by one percentage point from 40 percent to 45 percent. The State Treasury, in turn, ensures that the necessary assets are transferred to Keva, which in practice pays the earnings-related pensions of State personnel.

The Church Pension Fund is responsible for financing the pensions of the Evangelical Lutheran Church personnel and for investing their pension assets. The Church Pension Fund has been in operation since 1991.

The pensions of Kela’s personnel are financed from the pension liability fund for employees of the Social Insurance Institution Kela.

The Bank of Finland’s Pension Fund is responsible for financing the pension coverage of the Bank of Finland’s employees.

All of the above-mentioned actors are included in the investment statistics on earnings-related pension assets compiled by TELA.