Number of underinsured self-employed persons continues to grow

207 000 self-employed persons were insured under the Self-employed Persons’ Pensions Act in 2018. Every fourth of them set their confirmed income, which forms the basis of their future pension and other social insurance, at or near the minimum requirement. Of the newly self-employed, two out of five underinsured themselves, statistics of the Finnish Centre for Pensions reveals.

In 2018, the average confirmed annual income of all self-employed was 22,000 euros. That was two per cent less than in 2017.

The confirmed income under the Self-employed Persons’ Pensions Act forms the basis of the earnings-related pension and social insurance of the self-employed. Self-employed people must set their confirmed income so that it corresponds to the value of the work input of the self-employed person. The confirmed income under the Self-employed Persons’ Pensions Act is often lower than the taxable income of the self-employed; on average, it is 70 per cent of the taxable income.

More than half of the currently insured annual confirmed income under the Self-employed Persons’ Pensions Act is less than 16,000 euros.

“The average value of the currently insured confirmed income was reduced in 2018 in all age groups of insured self-employed persons. On average, the confirmed income of the younger age groups dropped more than those of the older age groups,” explains Eeva Poutiainen, Development Manager at the Finnish Centre for Pensions.

An increasing number of newly self-employed underinsure themselves

Self-employed persons with an insurance under the Self-employed Persons’ Pensions Act numbered 207,000 in 2018. Nearly a quarter of them (24%) set their annual confirmed income under the Self-employed Persons’ Pensions Act at or close to the minimum level (€7,656).

The share is even higher among the newly self-employed: two out of five (or 42%) underinsured themselves. The average annual income of the newly self-employed was 16,000 euros in 2018.

“The real-term average confirmed income of the newly self-employed is at the level it was at the beginning of the 2000s,” says Poutiainen.

Confirmed income the basis of social security

The earnings-related pension insurance of the self-employed secures the income when the self-employment ends due to disability or old age. It also providers for the widow(er) and the children if the family’s breadwinner dies.

In addition to the earnings-related pension, the confirmed income under the Self-employed Persons’ Pensions Act also forms the basis of several social security benefits, including the sickness benefit, the unemployment allowance and the parental allowances.

Insurance of the self-employed

More information 
Eeva Poutiainen, phone +358 29 411 2219, eeva.poutiainen(at)etk.fi
Ari Kaartinen, Mathematician, phone +358 29 411 2638, ari.kaartinen(at)etk.fi