Benefits of your own pension foundation or fund
Employers are responsible for providing pension cover for their employees under the Employee Pensions Act (TyEL). The insurance obligation can be taken care of by:
- an employment pension insurance company
- a pension foundation; or
- a pension fund
Occupational pension insurance companies include Veritas, Varma, Ilmarinen and Elo, and the majority of employers have taken out occupational pension insurance with them.
The option offered by pension foundations and pension funds is less familiar to employers, even though the oldest pension insurer still operating in Finland is the Pharmacy Pension Insurance Fund (Apteekkien Eläkekassa), founded in 1864.
As they are focused on a limited clientele and sometimes only have one employer as a client, pension foundations and pension funds do not need to market their services in the same way.
Employment pension insurance companies actively market their own services using, for example, costly sales networks.
A pension foundation or fund is an excellent alternative to an employment pension insurance company
Pension foundations and pension funds are free to decide the amount of the contribution they charge their employer.
- For employment pension insurance companies, the Ministry of Social Affairs and Health sets the amount of the annual premium to be charged separately, from which the occupational pension insurance companies can separately give small customer credits.
Pension foundations and pension funds decide on their own investment activities.If they do this well, the premiums charged pension foundations and pension funds are lower than those charged by any employment pension insurance company. If the pension foundation or fund is sufficiently solvent, it does not have to charge any contributions to its employers.
- If the employer’s insurance history is suitable, portfolios can be transferred from an employment pension insurance company to a pension foundation or pension fund with a premium that is already lower than the premium charged by the employment pension insurance company.
A well-managed pension foundation or fund can be used for financial planning of the employer’s business.
- The pension foundation or fund can own shares and real estate in the employer’s company, or provide loans to the employer
- When the employer’s financial situation is good, it can pay higher than normal contributions to its own pension foundation or fund and withdraw them when the economy deteriorates, provided that the pension foundation or fund is sufficiently solvent.
- By not having to market the pension foundation or fund the employer saves on administrative costs.
- In employment pension insurance companies, welfare-to-work funds are not distributed to all employers evenly. In the case of an in-house pension foundation or fund, the occupational well-being funds are also retained within the company or, alternatively, they can be left unused and the premiums charged to employers can be reduced.
Other benefits
- In a pension foundation or a pension fund, employers and employees can always elect their own representatives on the board and have a say in its activities.
- In pension foundations and funds, new disability pensions do not involve a change of contribution category because they do not use a contribution category model.
- In the case of pension foundations and funds, disability pensions may not require any contribution if the foundations or funds are sufficiently solvent. In an employment pension insurance company, disability pensions always have a cashflow effect on the employer covered by the defined contribution scheme, and a small employer always pays the imputed disability pension contribution.
- In large occupational pension insurance companies, employees’ calls are often answered by a different person, whereas smaller pension foundations and funds can offer a more personalised service.
Employees receive their pension in the same way and in the same amount, no matter whether the employer chooses an occupational pension foundation, a pension fund or an employment pension insurance company.
The employee’s share of the occupational pension contribution is also determined the same way, regardless of the occupational pension insurer chosen by the employer.