How does a layoff or a termination of employment affect pension cover?
How does a layoff affect the future pension?
As no salary is paid, pension does not accrue on the basis of the salary during the layoff. Some pension accrues on the basis of the earnings-based daily allowance paid by the unemployment fund. When compared to pension accrued on the basis of income earned from work, the pension accrued during the earnings-based daily allowance period is smaller as the basis for the pension is 75% of the earned income used as the basis for the daily allowance.
Exception: pension does not accrue on the basis of the earnings-based daily allowance if the person in question receives disability pension at the same time. The earnings-based daily allowance accrues pension until the minimum retirement age for old-age pension.
How does a termination of employment / becoming unemployed affect pension?
Pension accrual based on earned income ends with the termination of employment. However, pension accrues on the basis of the earnings-based daily allowance.
An older employee may receive unemployment allowance until the start of retirement on old-age pension or the age of 65. This is called additional days of unemployment allowance, or the so-called “unemployment path to retirement”.
The entitlement to additional days requires
- that the person has been in pension-insured employment for a minimum of 5 years during the last 20 years and
- that a person born in 1957–60 has reached the age of 61 before the maximum unemployment allowance limit of 500 days is reached or a person born in 1961 or later has reached the age of 62 before the maximum unemployment allowance limit is reached.
It takes approximately two years to reach the limit of 500 days.
Does a layoff or a termination of employment affect partial early old-age pension?
No, it does not. The payment of pension continues normally. Receiving partial old-age pension does not require employment. Partial old-age pension does not affect the earnings-based daily allowance.
Does a layoff or a termination of employment affect part-time pension?
The payment of part-time pension ends if absence from work continues for more than 6 weeks. Part-time pension was replaced with partial old-age pension in 2017. There is still some part-time pension being paid.
Does a layoff or a termination of employment affect partial disability pension?
The payment of pension continues at the equal amount as before. You are not required to be work while receiving partial disability pension. The partial disability pension amount is deducted from the earnings-based daily allowance.
How does a layoff affect a work trial that has already started?
If the interruption is short-term, the rehabilitation allowance continues to be paid.
If a work trial is interrupted for more than one month or in its entirety due to the circumstances caused by the coronavirus, contact Varma’s rehabilitation services.