Pension providers begin reviewing YEL incomes

The YEL expert at Suomen Yrittäjät, the Finnish SME association, says that pension providers must hear business owners’ views and take them into account when making decisions.

The amended Entrepreneur’s Pension Act entered into force on 1 January this year. The pension providers are going to review all active YEL insurance policies which have been in force for at least three years and which have not been substantially amended during the past three years. After that, the pension providers will recommend a new YEL income to the business owners.

On social media, the reviews have caused discussion, such as on the amount by which a YEL income could rise.

“Under the transitional stipulations of the legislation, during the first review round and the next one in three years’ time, the pension provider may raise YEL income by no more than €4,000 as a result of the review,” Harri Hellstén, Labour Market Affairs Manager at Suomen Yrittäjät, the Finnish SME association, says.

This increase of €4,000 is only possible with the business owner’s consent. Hellstén says that not responding to the pension provider’s messages is not the same as consent.

“An increase above the maximum limit can only be made by the pension provider if the business owner actively shows that they consent to it.”

“We’ll listen to how the business owners respond”

A business owner may then soon be contacted by their pension provider. Elo is one of the pension providers that has started reviews of YEL incomes.

“We’ve begun contacting a small group of policy holders, but we’re focusing most of our contacts on the autumn,” Elo’s COO Jouni Seppänen says.

Elo is contacting its customers by letter and email. After that, the policy holder has the opportunity to react to the proposal within two weeks.

“Part of the purpose of this first contact round is to hear how business owners are doing and how they take the message. Of course, the easiest thing would be for the business owner to say that our proposed new YEL income is corrected. Naturally, in all cases we take the business owner’s view into account.”

Seppänen says that a business owner has two weeks to react to the pension provider’s proposed new YEL income.

“At first glance it would appear that many business owners agree with our proposals,” Seppänen says.

A few business owner customers have contacted Elo to say they disagree with the proposed new YEL income.

“We’ve sometimes had long discussions. It’s important to remember the statutory limit: €4,000 is the most YEL incomes can rise by. That’s put business owners’ minds at ease,” Seppänen says.

YEL tour ends in webinar

The Finnish Pension Alliance TELA, Suomen Yrittäjät, the Finnish SME association, and the pension providers held a closing webinar on Monday 12 June to end the YEL tour they had organized. It was held in partnership with Uudenmaan Yrittäjät, the regional association of Suomen Yrittäjät in Uusimaa.

The webinar discussed the reform of the Entrepreneur’s Pension Act from a range of perspectives, with contributions from TELA, Suomen Yrittäjät and specialists at the pension providers. Labour Market Affairs Manager Harri Hellstén represented Suomen Yrittäjät. The event included a question and answer section.

The sessions were free for all business owners. Read more about the event here.

Pension provider must consider business owner’s view

If the increase proposed by the pension provider feels incorrect, and the business owner does not consider the value of their labour input corresponds to the new figure, the business owner may present their own view of the value of their labour input. Hellstén says that the pension provider must consider the business owner’s view when making a decision.

After the pension provider contacts the business owner with a proposed new YEL income, the business owner has two weeks to react.

“If the business owner does not react, the pension provider can fix a new YEL income in line with its recommendation. However, during the transition period it can only be €4,000 higher and it will come into effect at the start of the second month following the month in which the pension provider sent its proposal,” Hellstén says.

The increase of €4,000 is only possible with the business owner’s consent.

When pension providers review YEL incomes, they use the YEL income recommendation calculation service they have built. However, this calculator is just an aid each pension provider uses to assess YEL incomes. It is based on each sector’s average turnover and salary data.

“The figure the calculator gives is not a statutory YEL income. It is merely the starting point for a conversation. In addition, when a pension provider fixes a YEL income, it must consider all the factors that play into the business owner’s labour input and its value,” Hellstén says.

For example, the Finnish Centre for Pensions has compiled application recommendations for pension providers. They contain details of the factors affecting the evaluation of YEL incomes. See the recommendations here.

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