Description of benefit 2018: Statistics on the pensions provided by Kela

This text has been created for statistical purposes. Up-to-date information on benefits can be found on Kela’s website at www.kela.fi/english.

Kela provides the following pension benefits: national pension, guarantee pension, survivors’ pension, child increase, front-veterans’ supplement and additional front-veterans’ supplement. National pension can be paid in the form of an old-age pension or a disability pension. Survivors’ pensions are awarded as either orphans’ pensions or spouses’ pensions.

National pensions, guarantee pensions and survivors’ pensions are taxable income but front-veterans’ supplements and child increase are tax-free benefits. Pensioners are entitled to a pension income tax deduction, the purpose of which is to ensure that pensioners who receive only national pension or guarantee pension do not pay tax on their pension income. The amount of pension benefits is adjusted yearly in line with changes in the national pensions index.

The key legislation governing the benefits paid by Kela are the National Pensions Act (568/2007), the Act on Guarantee Pension (703/2010) and the Act on Front Veterans’ Pension (119/1977). Amendments to the Act are described in the appendix to Kela’s Statistical Yearbook.

Eligibility. Eligibility for national pensions and guarantee pensions extends to persons who are resident in Finland. Residence in Finland is defined in the Act on the Implementation of Residence-based Social Security Legislation. Residents of Finland become eligible once they have lived in Finland for a total of at least three years after reaching the age of 16 years. Disability pension can be granted, without the three-year residence requirement, to persons who are living in Finland and who become disabled while under the age of 19. The residence requirement does not apply to persons applying for disability pension who, when they turn 16, are being paid disability allowance for persons under the age of 16.

Survivors’ pensions are payable to surviving spouses and children living in Finland. A further requirement is that the deceased person must have been living in Finland at the time of his or her death. The residence-period requirements for the deceased and the surviving spouse are the same as those applicable to national pensions. These requirements do not apply to children.

Front-veterans’ supplements and additional front-veterans’ supplements are granted to residents of Finland who have been given official front-veteran status. The front-veterans' supplement may also be granted to persons living abroad, provided that they are receiving national pension from Finland. The so called front-veteran’s supplement payable abroad, which is paid twice a year is granted to persons living abroad who, regardless of nationality, have an official status entitling to this supplement and who do not receive national pension from Finland. The child increase is available to pensioners living in Finland who have a dependent child under 16 years of age who is living in Finland.

If a recipient of a national or survivors’ pension moves abroad permanently, payment of the pension continues for one year if the pensioner has lived in Finland for at least one year before payment of the pension started. Persons who move abroad temporarily, i.e. for less than a full year, will continue to receive guarantee pension.

The effect of EU legislation and social security agreements. There are certain exceptions to the rules concerning residence-based retirement provision which flow from the EU legislation and bilateral social security agreements signed by Finland. The EU provisions apply to nationals of EU countries, EEA countries and Switzerland as well as to third-country nationals (and their family members) insured in the above countries. The Nordic Convention on Social Security mainly applies to Nordic nationals living in EU and EEA countries who do not come within the scope of the EU legislation. Bilateral social security agreements offer reciprocal access to pensions from the other signatory country.

National pensions and guarantee pensions

National pensions are paid to persons whose pension based on past employment is small or non-existent. No national pension is payable to persons whose earnings-related pension exceeds a certain amount. Only one form of national pension is payable at a time.

Old-age pension

Old-age pension can be awarded

  • as an early old-age pension at the age of 63 or 64 for persons born before 1962. The pension continues to be paid as an early old-age pension and at the same amount when the recipient reaches the age of 65.
  • as an ordinary  old-age pension
    • at the age of 65
    • at the age of 62 or 64 for long-term unemployed persons born before 1962
  • as a deferred pension for persons who postpone their retirement past the age of 65.

Disability pension

The disability pension is available to persons between ages 16 and 64 who, due to an illness, injury or impairment are unable to perform their normal work or other comparable work, which in view of their age, vocational skills and certain other factors, could be considered as suitable and as providing a reasonable income. When evaluating the entitlement to pension of a person who has turned 60, the vocational nature of the incapacity for work is especially taken into account.

Before disability pension can be granted, the applicant’s eligibility for vocational or medical rehabilitation is evaluated. During participation in vocational training or rehabilitation, young persons with disabilities under the age of 20 are paid a rehabilitation allowance for young persons.

Persons who are permanently blind or lack mobility are entitled to a disability pension as a matter of course.

Disability pensions can be awarded either indefinitely or for a specified period of time (as rehabilitation subsidy).

Persons who receive disability pension which is awarded for an indefinite period of time, paid by Kela, may if they find employment again, under certain conditions, put their pension on hold without losing their entitlement to the pension.

Disability pension cannot usually be paid until the recipient has been paid sickness allowance for 300 working days. Persons who have turned 63 are, however, not required to fulfil this maximum if they have been granted old-age pension under the earnings-related pension scheme. Disability pensions are automatically converted into an old-age pension when the recipient reaches the age of 65.

Guarantee pension

Guarantee pension is payable to persons whose other pension income from Finland or abroad is less than the amount required to qualify for the smallest guarantee pension. It can be awarded to persons aged 16 years or over who receive

  • old-age pension
  • disability pension
  • full disability pension or compensation paid in respect of a traffic accident or accident at work
  • farm closure compensation.

Persons moving to Finland may be entitled to a guarantee pension if they have reached the age of 65, or if they have reached the age of 16 and are disabled within the meaning of the National Pensions Act. Guarantee pensions cannot be granted solely on the basis of blindness or mobility disability.

Survivors’ pensions

Spouse’s pension

Spouse’s pension is payable to surviving spouses under the age of 65 years. Another requirement is that the deceased must have been under 65 years of age at the time of marriage. The surviving spouse is entitled to a pension if he or she has or had a child with the deceased.

If this is not the case,

  • the surviving spouse must have been at least 50 years old when the deceased passed away
  • the marriage must have lasted at least five years
  • the surviving spouse must have been at least 50 years old at the time of marriage.

Women born before 1 July 1950 are, however, eligible for this pension on less stringent terms.

If the deceased died before 1 July 1950, the conditions for eligibility for the pension differ from those referred to above.

The spouse's pension takes the form of a flat-rate initial pension payable for six months following the deceased person's death and a continuing pension paid thereafter and consisting of a basic amount and an additional amount. The basic amount is payable to surviving spouses with a dependent child under 18 years of age.

Survivors’ pension cannot be paid at the same time as national pension. A surviving spouse is, however, entitled to that part of the initial pension that exceeds the national pension.

A surviving spouse who has turned 50 can remarry without losing his or her entitlement to survivors’ pension.

Orphan’s pension

Orphan’s pension is payable to children under 18 years of age if one or both of their parents or guardians have died. Orphans between ages 18 and 20 are entitled as well if they are full-time students or in vocational education (Orphan’s pension for students). A child whose mother and father have both died gets two separate pensions, one after each parent. The orphan's pension comprises a basic amount payable to all beneficiaries, and an additional amount based on other forms of survivors’ pensions paid.

Other pension benefits

Other pension benefits provided by Kela are the child increase, the front-veterans’ supplement and the additional front-veterans’ supplement. They may also be related to other pensions than those paid out by Kela.

Child increase. Child increase is payable for children under 16 years of age who live in the pensioner's household. It is available as a supplement to national pensions as well as to disability, old-age and early old-age pension based on past employment. Eligibility for the child increase also exists for recipients of continuously paid special provision pensions and similar compensations.

Front-veterans’ supplement. Front-veterans' supplement is payable to persons who served in the 1939–1945 wars and were awarded a corresponding official recognition as well as for those who participated in mine clearance between 1945 and 1952.

Additional front-veterans’ supplement. Additional front-veterans’ supplement is payable to war veterans in receipt of both the front-veterans’ supplement and a national pension. Persons who participated in mine clearance are not entitled to the additional front-veterans’ supplement.

Front-veteran’s supplement payable abroad. Front-veterans' supplement payable abroad is payable to persons who served in the 1939-1945 wars and who have been awarded an official status entitling to the front-veterans’ supplement. The supplement is also payable to persons who participated in mine clearance between 1945 and 1952.

The effect of various factors on the amount of benefit

Effect of income

The amount of national pension is affected by the recipient's own earnings-related pensions and comparable compensations paid on a continuous basis. Pensionable income counts as income at its full amount, with the exception of benefits that count as income at a limited amount, some earnings-related incomes and one-off increases. Earned income, income from self-employment and investment or from assets do not affect the amount of national pension.

In the case of the guarantee pension, the recipient's other pensions are deducted from the guarantee pension. Earned income, income from self-employment and investment or from assets do not reduce the guarantee pension, neither does the care supplement for persons receiving pension, the front-veterans’ supplement or the child increase. The guarantee pension is reduced by a permanent early retirement deduction for persons who are receiving early old-age pension when payment of the guarantee pension starts.

In the case of the additional amount of the spouse's pension, 'income' means the pensioner's continuous income in retirement (including income from abroad). If the deceased died on or after 1 July 1990, only part of the spouse’s earned income (60%) counts as income when determining the additional amount of the spouse’s pension.

The additional amount of the orphan’s pension is means-tested against other survivors' pensions. It depends on the other survivors’ pensions or assistance pensions that a child may have after a deceased parent. The additional amount is payable to children under the age of 18.

Family circumstances

Income-related benefits are affected by family circumstances in the sense that the recipient’s relationship status (married, cohabiting, in a registered partnership) and shared household with spouse or partner affects the amount of such benefits. The effect of family circumstances on benefits and related income limits are described in figure 1.

Other factors

Early or deferred old-age pension. A permanent reduction of 0.4% per month of early retirement is made to the amount of early old-age pensions. Deferred old-age pensions are increased by 0.6% for each month by which the start of pension is postponed past the age of 65 years.

Adjustment of pension to residence in Finland. Under the legislation on national pensions, the amounts of national pensions and spouses’ pensions are proportional to the length of residence in Finland. The pension is adjusted to residence if the applicant has spent less than 80% of the time between age 16 and the start of pension in Finland. The adjustment coefficient is derived by dividing the length of time lived in Finland by 80% of the time between age 16 and the start of pension.

For employees insured both in Finland and in some other EU or EEA country or in Switzerland, the amount of pension payable is calculated according to the EU legislation. If there is entitlement to a pension based on the Finnish legislation, the pension is calculated on the basis of both the national legislation and the EU legislation. The pension is awarded according to whichever method of calculation results in a larger pension. If there is entitlement only on the basis of the EU legislation, the amount of pension is calculated only according to the EU legislation (pro-rata pension).

When calculating pro-rata pensions, the first step is to calculate the amount payable as if all periods of residence completed by the applicant in some member country had been completed in Finland. The pro-rata pension is then calculated by multiplying the result by the ratio of the periods of insurance completed in Finland to the combined length of periods of insurance completed in other member countries. Orphans' pensions, too, are adjusted to residence when calculating pro-rata pensions.