The draft Government proposal for the reform of the Self-Employed Persons’ Pensions Act (YEL) is being circulated for comments. Comments on the proposal can be submitted until 5 August 2026.
The reform will give freedom of choice in the determination of YEL contributions and allow more flexibility as regards the contributions.
The reform allows entrepreneurs to decide for themselves whether their pension contributions and the benefits based on them will be determined by their taxable earned income or the currently used calculated YEL income method. In the draft proposal, these models are called the earned income model and the overall assessment model.
Real-time income information not available
In the earned income model, the entrepreneur’s YEL income is based on the latest confirmed tax information, in other words, income information that is approximately two years old.
“The idea of entrepreneurs’ pension contributions being based on real-time income information is not realised in practice as the information available is two years old. The situation of an entrepreneur may change considerably in two years”, says Staffan Åberg, Director for Pensions and Insurance Services at Veritas.
If the entrepreneur selects the calculated YEL income, it will, however, have to be at least 50 per cent of the taxable earnings of the entrepreneur. This 50 per cent minimum condition for YEL income will enter into force gradually throughout the transition period between 2028 and 2032. The minimum level will rise gradually from 30 to 50 per cent by five percentage points per year.
It is possible to change the model every three years.
“The proposed model will not make the pension system for entrepreneurs any simpler as there are two models to choose from. The reform will, however, offer more freedom of choice for entrepreneurs and make the pension contributions of small-scale entrepreneurs more reasonable. Changes may still be made to the proposal”.
Increased flexibility for YEL contributions
The Government proposes that YEL contributions could be paused while receiving sickness allowance or parental allowance. In addition, the reduction flexibility of YEL contributions would be increased to 25 per cent. At present, YEL contributions can be reduced temporarily by 10–20 per cent. The payment flexibility included in the proposal would replace the current discount for new entrepreneurs.
The aim is for the legislative amendments to enter into force on 1 January 2028. However, the provision on the determination of the entrepreneur’s YEL income would enter into force already on 1 November 2027 to allow the entrepreneurs to have time to select their preferred income model for the year 2028.
“There is no need for the entrepreneurs to rush here. The most important thing is to maintain a sufficient level of YEL income as it is the foundation of the entrepreneur’s social security. If you need any help with pension insurance matters, your contact person at Veritas will be happy to help”, says Åberg.
We will monitor the progress of the reform work and keep our customers informed of any possible changes.
