Light entrepreneur’s pension
Accruing pension is something that you rarely need to think about when you are employed. The TyEL (employer’s pension) insurance ensures that you accrue pension in accordance with your pay. However, the situation is different for light entrepreneurs, as pension does not accrue automatically without action on your part.
A pension will ensure your livelihood after you leave working life. Entrepreneurs and light entrepreneurs are responsible for properly organising their pension themselves. Next, we will be looking into how a light entrepreneur’s pension is determined, what a YEL (self-employed person’s pension) insurance is needed for, and how income is determined.
YEL insurance is the legally required pension insurance for entrepreneurs, through which the entrepreneur takes care of their own pension. Unlike the TyEL insurance for employees, taking care of your YEL insurance is entirely your own responsibility.
You are obligated to take out YEL insurance if all of the following conditions are met:
- You work as an entrepreneur or light entrepreneur outside of an employment or public-service relationship.
- The activities last at least four months.
- The estimated income for the entire year exceeds the minimum limit for insurance (€8,575.45 in 2023).
- You are between the ages of 18-68. The upper age limit for insuring rises gradually according to one’s year of birth as follows:
- 68 years for those born in or before 1957.
- 69 years for those born between 1958-1961.
- 70 years for those born in or after 1962.
We will help you with questions relating to the YEL pension and YEL payments. Read more on how Eezy Light Entrepreneurs can help with the YEL pension.
When you outsource YEL pension payments, a portion of your pay is automatically set aside and the invoices are paid automatically. Please also note that new entrepreneurs receive a 22 per cent discount on the YEL payments for the first four years.
A light entrepreneur must take out YEL insurance when the conditions mentioned above are fulfilled. The pension accrued by a light entrepreneur as well as the pension payments to be made are determined based on the reported YEL income, regardless of the pay you take for yourself.
The pension payments and the amount of accruing pension is determined by the YEL income, which is your own reported estimate of the value of your annual work contribution. Although you can set your income yourself, according to the law, this must be based on the average remuneration paid for your work. You can join an entrepreneurs’ unemployment fund when your YEL income is €14,088 per year. Please remember that your annual work contribution is not reviewed for a calendar year, but for a period of 12 months.
If you are 53–62 years old, you fall under the exceptional group of 2017–2025, for whom pension is accrued at a rate of 1.7% of income. For those belonging to the exceptional group, YEL insurance payments are also higher.
You can evaluate the amount of pension accruing for you easily with the YEL calculator.
There are several principles in determining YEL income, but there is no reason to under-insure yourself. In addition to the pension you accrue, YEL income determines the level of your social security if, for example, you become unable to work.
As such, please make sure that your YEL income entitles you to a sufficient pension and daily allowance to ensure your livelihood.
Paying a sufficient YEL insurance will reduce your taxes, as YEL insurance payments are entirely tax-deductible.
Retiring as a light entrepreneur happens the same way as for a wage earner. Your birth year will determine the lowest possible age at which you can retire.
Like an employee, you can partially retire or apply for disability pension if your ability to work becomes weakened. You must apply for pension yourself when you become old enough to retire, and when you receive a positive pension decision other than a partial old-age pension.