In this episode in conversation with Anton Ropa from ELO we discuss the entrepreneur’s pension in Finland.

Namrata Sethi: Hello, and welcome to Finnish your Business. In our podcast we leave no business un-Finnished. I’m your host Namrata Sethi, and this podcast is brought to you by MEGE which is a joint project with Haaga-Helia university of applied sciences, Helsinki Business College, Aalto University, and The Shortcut, and the project is funded by Uudenmaan liitto. Today we have a very special guest joining with us from Elo. Welcome to our show Anton, and thank you for joining us.

Anton Ropa: Thank you for having me. It’s good to be here.

Namrata Sethi: If you could please tell us a little about yourself.

Anton Ropa: Yea. As you said, I come from the pension company Elo, and we are one of the pension insurers in Finland. We operate with companies and entrepreneurs in the private sector. For myself, I work as a sales negotiator in the company and I’ve been working especially with the entrepreneurs and then with small-time firms lately. It’s quite a good place to be in as I see it. I’m fond to think that it’s nice because of the entrepreneurs, they’re gonna take risks and think new ways to solve some problems. So I think it’s an important thing to have a discussion about.

Namrata Sethi: As you mentioned, what does entrepreneurship mean to you and why is it important?

Anton Ropa: As I think of it, entrepreneurship is usually either building something up, something new. Maybe figuring out new solutions for some problems that have been observed. Then one is pursuing what he or she can do at the best. I think it’s great because if there is not gonna be entrepreneurs then the other ones who would want to be employed, well if there’s no entrepreneurs there are no places to work.

Namrata Sethi: Yea, that’s true. How does your organization Elo help the entrepreneurs?

Anton Ropa: As I said, Elo is one of the pension insurers in Finland, and we offer for the entrepreneurs these YEL insurances. The YEL insurance means the pension insurance for entrepreneurs. YEL insurance, it’s a statutory insurance so basically if you meet few conditions it will become mandatory. But it’s gonna be the basis for your pension accumulation and then also for your social security level. We are trying to gather all the information and then make sure that everyone gets their pensions and gets their social security, such as sickness benefits or so on. We’re looking and watching over that part of the entrepreneurship.

Namrata Sethi: How does the pension system in Finland work?

Anton Ropa: In big picture, pension system is divided into two. So it’s the private part and then the public sector. And in the public sector, there’s municipalities and if you’re working in some kind of state or government or church, so that is part divided. And then there’s gonna be this private sector. In private sector actually, there’s nowadays four different companies that handle that part with a mandate from the government. We will make sure that everyone will pay their fees for that, and then we will also make sure that everyone who is eligible for the pensions will get them right and on time.

Namrata Sethi: Alright. Is it different for entrepreneurs and employers?

Anton Ropa: Yea, actually when you’re an entrepreneur, you have much more responsibility about the pension security for yourself. Because if you think that you’re an employee, it’s more like an automatic system for you because in Finland the employer is responsible to have the insurances for the employees. So actually if you’re an employee, you will see that when you will receive your payroll check there’s gonna be a small fee for the-

Namrata Sethi: Like a reduction.

Anton Ropa: Yea, a reduction that will cover your pension security. But when you’re an entrepreneur, you actually need to be right on time and you need to be the one who’s gonna take the insurance for you. Then with the entrepreneurs, they will actually state the level that will be the basis of the fees of the YEL insurance and also for the pension accumulation and social security. So basically, if you’re an entrepreneur you have much more responsibilities with it. But then also, in the flipside of the coin, there’s also possibilities for you to make the difference.

Namrata Sethi: And at what stage should the entrepreneur come to you?

Anton Ropa: Actually, if you think about entrepreneurship, it might be that you will be an entrepreneur in your own company or then you can be also a light entrepreneur if you’re invoicing for your work in some other company. But basically, that actually is not enough that you will find a new company. There’s gonna be a few conditions that, first of all, you need to be the owner of the company. Then you need to work in the company, then you need to be in the age between 18 and 68, then the entrepreneurial activities need to last at least four months’ period. And then there’s gonna be this YEL income level minimum, in annual matter it’s gonna be for this year 8063,57 cents so about 670 euros per month.

When we are discussing about this YEL insuransing and measuring if that amount is gonna be fulfilled, what is in the center of YEL insurancing is this YEL income. So the YEL income means the value of your own work for the company. In some cases, it might be that the turnover of the company, it can be that how much salary you’re gonna take for yourself off from the company. But the main idea is that it should be the value of your own work for the company. There’s also ways to think of it, it’s like how much you would be ready to pay salary for someone as competent as you to do your job, that can be the way. But just to conclude my long answer-

Namrata Sethi: [laughs]

Anton Ropa: Basically, when your founding a new company, that might not be the right time. But when the business activity in the company starts, then might be that you should start to calculate and see if the conditions will start to be meeting.

Namrata Sethi: Alright. What options do entrepreneurs have for their pension plans?

Anton Ropa: In Finland this is the statutory system so basically it’s mandatory. If the conditions are met, then you just to have to take it. But then of course, there’s possibilities to also take these voluntary pension securities from banks or some other insurance companies. Those can add up for the whole pension system. But the main thing is that with this YEL insurance, even though it’s mandatory, it’s risk-free. So there’s not gonna be like, we are responsible to make sure that the money is gonna be enough and we will invest it and make it for you. But when you’re having some kind of voluntary pension plans, it may be investing by yourself, there’s always included risk.

Namrata Sethi: Okay. How much does this YEL cost?

Anton Ropa: As I said, it depends on the level of this YEL income level. Basically, it is stated that the minimum level is about 8000 euros annually with this YEL income level. So from that 8000 it’s up to, I think, 863 000 euros annually so the gap is quite big. And then how you’re gonna calculate the fee that you’re gonna pay for the insurance, it’s stated by the Ministry of social affairs and health, in Finnish STM. They’re every year making the calculations about the YEL income installment percentage, this year it’s 24.1 percent. And then if you’re a starting entrepreneur, meaning that you have not had the YEL insurance before, you’re gonna get this starting entrepreneur discount for the first four years, that’s gonna be 22 percent. So after the discount it’s gonna be 18.8 percent but if you’re not eligible for the discount, in that case it’s gonna be 24.1 percent. So if I just give you an example, with 10 000 euros YEL income level, if you calculate it with the 24.1 percent then it would be 2410 euros. And with the discount it’s gonna be 1880 euros for the whole year. Then there’s possibilities that you can pay once in a month up to once in a year, so there’s possibilities.

Namrata Sethi: So if I’m earning 30 000 euros as my annual income, how much pension should I expect when I retire?

Anton Ropa: If you will earn 30 000 in a year in Finland, in both sides even though you would be an entrepreneur or an employee, it’s gonna be always 1.5 percent from the annual income. So in that case if you calculate it with 30 000 annual income, it’s gonna be 450 euros if I’m calculating it right, this annual pension. And usually the pension is stated as how much it’s per month. Then you’d just need to divide that 450 euros by 12 months and then you will get the right amount that how much you would generate your income accumulation in a year with 30 000 income level.

Namrata Sethi: Do entrepreneurs save themselves or is there a government system?

Anton Ropa: Basically, with this pension system, it’s that entrepreneurs are gonna state the YEL income level and then they will also choose the way that they want to pay it. So as I said, it can be from the once in a month up to once in a year. In that case, it’s the system that’s gonna handle it. Then of course there’s possibilities that entrepreneurs can also save by themselves, like have investments in housing or stocks or something like that. But as I said, the system is mandatory.

Namrata Sethi: And how can I be actually sure that after 30 years I’m going to get the pension?

Anton Ropa: For the system, it has been modified a few times, latest modification was year of 2017. And as you can see, for the last few years the pension age has been rising a bit, I think it’s been like three months per year. Earlier it was 63 years and in 2025 it’s gonna 65 years. I’m looking at the data, there has been modifications because of the calculations for the system that it will hold. The calculations are made up to, I think, for 100 years from now. We have seen in Finnish society that the demographic movement in the society has been that there’s gonna be much more older people in Finland and those who are gonna work, it’s gonna be a smaller amount of people. But the calculations are made and the modifications have been made to secure the system. I’m quite sure that it’s gonna hold.

Namrata Sethi: Okay. And then what does happen if Elo goes bankrupt?

Anton Ropa: The system is built like that all the pension insurance companies are jointly responsible for the pensions. So if one pension insurance company would go bankrupt, in that case all the other companies are demanded to cover, to hold the system so that it will hold. If one insurance company would go bankrupt it doesn’t mean that your pensions are gone but it means that then the other companies need to take these responsibilities to handle.

Namrata Sethi: If I’m an entrepreneur in Finland but I want to move my carrier to somewhere else. How do I get the pension money?

Anton Ropa: In Finnish system you will get the money as soon as you turn the age of pension in Finland. Let’s say that it would be 65 years, so if you would move before that abroad, then as soon as you will turn 65 years old you can apply for the pension accumulation from Finland. Then it would be paid for you where you would live. But in some systems there are things that they’re gonna pay in a bunch as soon as you will move out but that’s not the case in Finland. In Finland you will get your pension when you will turn the age and then it will be paid until you pass away.

Namrata Sethi: Alright. Do I need to necessarily have a Finnish bank account or it can be paid if I’m living in some other EU country?

Anton Ropa: Yea, it can be paid. It does not require that you have a Finnish bank account.

Namrata Sethi: So even for employees, if you move you will only get the pension after you turn 65, is it like that?

Anton Ropa: Yea. It’s that you will get it as soon as you turn 65. But I think in EU there’s some kind of agreements that it’s gonna be more automatic with those countries. But with other countries it’s that you need to apply. But you will get it, so if you have accumulated pension in Finland you will get it also to abroad.

Namrata Sethi: Because when I was living in Australia and then when we moved it was that you take your pension along with you.

Anton Ropa: Okay.

Namrata Sethi: So it’s not that you need to wait ‘til you’re 65. It’s right there that okay, you have left and now you can take it with you.

Anton Ropa: Okay.

Namrata Sethi: Or you could even wait ‘til 65 but it depends on you.

Anton Ropa: Yea. If I understood right, it’s always in Finland that as soon as you turn the age, then you will get it but not before.

Namrata Sethi: Alright. So is the pension saving paid to me (–) [18:55] as you said, it does?

Anton Ropa: Yea.

Namrata Sethi: Alright. And we’re almost done. Last question would be, what advice would you give to an entrepreneur in five words?

Anton Ropa: I actually wrote it down.

Namrata Sethi: Okay. [laughs]

Anton Ropa: I needed to think it through how to put it into five words. I would say that, remember, take risks into account. Because always we want that everything will go just as smooth as possible and it will be like jumping from flowers but there’s always risks. Just as this corona times has showed, there can be risks that you cannot take into account but just be aware that there are risks and you’re better off if you will take them into account so then you have some kind of a preparation plan how to handle them if you face them.

Namrata Sethi: It never goes smoothly, right?

Anton Ropa: [laughs]

Namrata Sethi: If it’s going smoothly something is wrong. [laughs]

Anton Ropa: [laughs] Most of the cases. But yea, even thought it would be that, I like to think that it’s always better to be prepared than just to assume that everything will be just sunshine.

Namrata Sethi: That’s true, yes. Is there anything else that if I have missed you would like to cover, especially for international talent who are coming to Finland? If they would like to have something when they are taking these pensions.

Anton Ropa: Basically, I would encourage everyone to look for the websites. And if you do not find the information, just call us, we will help you. We handle these every single day, and most of the time if there’s gonna be some kind of a problem with the system it’s probably because someone hasn’t just understood it right or something. But we are here to help you, not to be run away from. We will help you.

Namrata Sethi: And they can find the website at www.elo.fi?

Anton Ropa: Yea.

Namrata Sethi: Alright, great. Thank you so much for joining us Anton and giving us such a wonderful insight on this topic.

Anton Ropa. Thank you. Thank you for having me, and I will wish everyone good rest of the week. And hopefully this year will be better than the last one.

Namrata Sethi: I hope so too.