Legislation in Finland aimed at improving social security and pensions coverage for self-employed people has been passed by the country’s parliament, but more changes are still needed, according to one of Finland’s main pension funds.

Risto Murto, chief executive officer of Varma, said: “The amendment is a step in the right direction, even though a number of desired developments still remain on the table.

“However, the act will provide our operations with a clearer and more consistent operating model for confirming and adjusting the confirmed income throughout the earnings-related pension sector,” he said.

Murto said Varma, which had total assets of €56.1bn at the end of September, would now assume a new responsibility for regularly verifying that the earned YEL income developed in the right direction over the years.

The amendment to the Self-employed Persons’ Pension Act (YEL) which has now become law is meant to improve social security and pension coverage for the self-employed and clarify how confirmed YEL income is determined, according to Varma.

While the concept of confirmed YEL income remains unchanged, and will continue to mean the monetary value of the self-employed person’s work contribution, the aim of the new amendment is for confirmed income to be at the right level throughout a person’s career.

“Going forward, earnings-related pension companies are required to monitor and regularly revise the level of a self-employer person’s confirmed income,” Varma said.

The amendment requires an earnings-related pension company to carry out an overall assessment based on the industry median salary, amount of work contribution, extent of entrepreneurial activity, the self-employed person’s professional skill and value of their work contribution, it said.

The Helsinki-based pensions insurance company – the largest of the four in Finland’s earnings related pension system — said it could be difficult for a self-employed person to assess the statutory level of confirmed YEL income.

For that reason, it said, earnings-related pension companies had adopted a new confirmed YEL income calculator for the self-employed developed by the Finnish Centre for Pensions in September.

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Rachel is IPE's Nordic correspondent. She has long been a freelance writer, and over the years, has written for The Telegraph, The Independent, The Observer, AMWatch and elsewhere. In 2001, Rachel's personal finance book Kickstart Your Money was published by John Wiley & Sons.View full Profile

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