The reform aims to moderate the pension contributions of low-income entrepreneurs and give them greater freedom of choice. The proposed reform would give entrepreneurs the option to choose whether their pension contributions are based on the taxable earned income from their self-employed activities or on the current system of estimated YEL income.
“The reform will increase entrepreneurs’ freedom of choice but also undoubtedly raise questions about which option is best for their situation. It may seem like a difficult choice, as either option will affect both the entrepreneur’s contributions and their future pension and social security. However, our customers can rest assured that we will provide guidance and help them navigate this change,” assures Varma’s Senior Vice-President, Pension and Insurance Services, Tarja Syvälä.
The reform is scheduled to enter into force on 1 January 2028. In 2027, YEL income will still be subject to the current legislation.
Varma is closely monitoring the finalisation of the changes and making preparations to support entrepreneurs as well as possible in both our digital channels and customer service.
“All of our self-employed customers are in a different situation, so we will provide good insight and advice to support each person’s situation and decisions,” Syvälä adds.
What do we know about the legislative reform right now?
Under the draft proposal, entrepreneurs would in future be able to choose whether their YEL income is based on an overall assessment similar to the current system, or on the taxable earned income from their business activities, as determined in their most recently finalised tax assessment.
In the overall assessment model, YEL income would be determined the same way as before, meaning even after the reform YEL income should equal the annual salary that would be paid to an employee with the same skills for carrying out the same work. What would be new is that the entrepreneur’s YEL income should be at least 50 per cent of the income earned from their entrepreneurial activities. The minimum level in 2028 would be 30 per cent, and it would increase annually by 5 percentage points until it reaches 50 per cent.
In the income model, the entrepreneur’s income would be determined based on the taxable earned income from their business activities, in accordance with their most recently finalised tax assessment. Their income level would, however, be at least at the lower limit of the YEL insurance obligation (EUR 9,423.09 in 2026).
Entrepreneurs would be bound by the basis they choose for determining their YEL income for three years, after which the pension insurance company would give them new information to help them choose their YEL income basis. In addition, in the overall assessment, entrepreneurs would retain the possibility to apply for a change in their YEL income, and entrepreneurs who choose the income model could switch to the overall assessment model if factors affecting their work input change substantially.
The pension insurance company would verify annually that the entrepreneur’s YEL income is,
- in the overall assessment model, at least 50 per cent of the taxable earned income from self-employed activities, and
- in the income model, equal to the taxable earned income from self-employed activities.
Other planned changes
- Entrepreneurs could terminate their YEL insurance on the basis of sickness allowance or parental allowance granted for at least three months.
- The discount for new entrepreneurs would be eliminated. If an entrepreneur was granted a discount before the act entered into force, they can keep their discount in effect by notifying the pension company thereof.
Further information about the legislative reform
YEL reform enters consultation phase - Finnish Government (in Finnish and Swedish)
Request for comments on a draft government proposal to amend the Self-Employed Persons’ Pensions Act and section 2 of the Act on the Finnish Centre for Pensions (in Finnish and Swedish)
Previous news
YEL insurance reform – more freedom of choice for entrepreneurs - Varma (in Finnish)