FINLAND - A study suggests Finnish self-employed workers are not paying enough into their pension funds as the levels of self-employed persons pensions insurance (YEL) policies are about a third lower than actual annual income.

Research by the Finnish Centre for Pensions - the statutory central body of the Finnish earnings-related pension scheme - revealed self-employed people are "underinsured" for retirement in relation to their income levels by buying YEL policies which are too small.

YEL policies are a statutory requirement, like pension insurance for other employees (TyEL), however self-employed workers can decide the level of pension provision as the income from a YEL policy does not have to exactly correspond to a self-employed worker's taxable income but can instead fall between certain 'flexible limits'.

The guidelines laid down by the Finnish Centre of Pensions state the basis of the YEL insurance should be equivalent to the average wage in the self-employed worker's relevant industry, however the research showed the income for self-employed people is "lower than the average wage". 

Figures in 2007 revealed over 600 self-employed workers took advantage of the flexibility of pension payments, which at the lowest level can be between 10-20% of earnings and at the most can be 100%.

In this latest report, which examines the difference between pension provision arranged by the self-employed and the earned income used as a basis for taxation, researcher Raili Hyrkkänen claimed "the level of YEL insurance is about one-third lower than the self-employed person's earnings would indicate".

The findings also suggested that in "most lines of work the confirmed income does not reach the level stipulated in the instructions of the Finnish Centre for Pensions", and the report argued the proposed level of retirement insurance is best achieved in sectors where the income level is low anyway.

The research, based on employment statistics and data from the Finnish Centre for Pensions, also suggested that a low YEL income weakens access to social security entitlement including whether they can retire on a part-time pension, as their earnings must reach a certain level.

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