Finland's Ministry of Social Affairs and Health has launched a public consultation on draft reforms to the Self-Employed Persons' Pensions Act (YEL), which would allow entrepreneurs to choose whether their pension contributions are based on the current assessment model or on taxable earned income.

Under the proposals, self-employed workers would be able to choose whether their YEL income is based on the current overall assessment carried out by pension providers or on the taxable earned income reported in their most recently completed tax assessment.

The draft legislation also includes minimum income requirements designed to prevent insured income from being set significantly below taxable earnings.

Following a transitional period, YEL income based on the current assessment model would have to amount to at least 50 per cent of the entrepreneur's taxable earned income.

In addition, the proposal would abolish the current contribution discount for new entrepreneurs. The ministry said changes would instead be made to supplementary and reduced earnings-related pension contribution arrangements, which would also be made available to those starting a business.

The consultation also proposes changes to improve the administration of the YEL system and would require the Finnish Centre for Pensions to consult key entrepreneur organisations when developing the data used to determine YEL income.

The proposed reforms are scheduled to come into force on 1 January 2028, although one provision related to the determination of YEL income would take effect from 1 November 2027, ahead of the wider implementation of the changes.

The consultation runs until 5 August 2026.

Responding to the consultation, Finnish Pension Alliance (Tela) CEO Saara-Sofia Sirén argued that the proposals fail to deliver on the government's aim of aligning pension contributions more closely with entrepreneurs' actual income.

Sirén said the model would rely on taxable earnings that could be up to two years old, meaning it would not adequately reflect fluctuations in entrepreneurs' income.

"The proposal, therefore, does not solve the key problems with entrepreneurs' pension insurance; at worst, it adds to the complexity," she said.

In addition, Varma director of pension and insurance services Tarja Syvälä argued that the reform would "raise questions" about which option is best suited to each entrepreneur's situation.

"The choice may seem difficult, as both options have implications for both contributions and future pension and social security benefits," she said.

Elo CEO Carl Pettersson also argued that the reforms do not address the longer-term issue of introducing funding into the YEL system.

"This latest reform round, like previous ones, has not made progress on introducing funding into the YEL system. It is not an easy issue, and there never seems to be sufficient resources available," he said.

However, Ilmarinen head of insurance and pensions, Tiina Nurmi, welcomed the move toward an earnings-based model, describing it as a "good start".

"Earnings-based insurance is clear, equitable, and flexible for entrepreneurs," Nurmi said.

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