Changes to how TyEL contributions are determined – Varma’s efficiency and solvency will directly benefit customers

The TyEL contribution is a statutory, earnings-based insurance contribution paid by companies to secure their employees’ pensions. Following a new legislative amendment, there will be differences in TyEL contributions according to pension company as of 1 January 2023.

Starting next year, earnings-related pension insurance companies will be able to independently determine how much of the TyEL contribution, i.e. the so-called administrative cost component, will be based on its operating expenses and take it into account in the correct amount in the TyEL contributions that are collected directly from customers.

Until now, the TyEL contribution and the administrative cost component it includes, before client bonuses, have been the same for all private-sector employers regardless of their earnings-related pension insurance company. The Ministry of Social Affairs and Health has confirmed the annual TyEL insurance contribution, and a difference in the final contributions of earnings-related pension companies’ has arisen when customers have been paid a client bonus.

The client bonus has been determined by how cost-effective the pension insurance company has been in managing its operations, and by how solvent it has been. Customers will be paid a client bonus also in future, but as of spring 2024, the bonus will be based solely on the pension company’s solvency. The part of the customer bonus that is based on the pension company’s operational efficiency, i.e. the so-called loading profit, will be eliminated, as each pension company will predetermine the administrative cost component that is part of the TyEL contribution to correspond as closely as possible to its actual operating costs.

In the case of large companies, the employer’s contribution category will still affect the amount of the earnings-related pension insurance contribution.

Varma’s efficiency and solvency mean low TyEL contributions for customers

Varma’s operational efficiency is at an excellent level. For our customers, this will translate directly to low TyEL contributions in future. The final amount of the contributions paid for TyEL insurance will also be reduced by the annual, record-high client bonuses that are paid based on Varma’s solvency.

The exact company-specific TyEL contribution percentage for Varma’s customers will ultimately be determined by the company’s size (i.e. the company’s own and the group’s total payroll insured by Varma) and possible disability pension contribution category.

The change will enter into force such that it will affect TyEL contributions for the first time in 2023 and customer bonuses that accrue in 2023 and are paid in spring 2024.

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