Pension contribution for PhD student

delhi_loafer · Post by **delhi_loafer** » Sun May 01, 2016 7:08 am

Hello, I am a non-EU student planning to start my PhD at Aalto University this summer. My starting salary is 2400 eur/month with a 4 year contract. I was looking at the tax rates and I noticed that there is a pension contribution of around 5.7%. If I understand correctly, the pension contribution is returned only after retirement in terms of pensions. However, as I am not a Finnish citizen, there are very less chances of me being in Finland at retirement age. I wanted to know if pension contribution for non-citizens is optional.

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Flossy1978 · Post by **Flossy1978** » Sun May 01, 2016 10:15 am

Nope. You have to pay it, just like the rest of us have, or are doing. Then you wait till retirement to get your bit back. Sucks, but that is how it is.

wolf80 · Post by **wolf80** » Sun May 01, 2016 12:19 pm

As Flossy said, nope, no chance.

I guess you will get roughly 1800 out of the 2400 Euro. When you come to Finland you have to choose the appropriate tax percentage. That one will be lower, so you will earn more, as it is calculated for the income of the whole year and you start in the middle of the year. So either you do that with the tax office Vero, or easier with IntoFinland, and they will also help you with a couple of other things. You need a tax card for your employer so they can pay your salary, so this will be one of the first things to do after you arrive and have your Finnish ID number. Don't forget that the following year you have to change the tax percentage (as you now have 12 months taxes over the year), and the same applies if your salary goes up.

betelgeuse · Post by **betelgeuse** » Sun May 01, 2016 2:37 pm

delhi_loafer wrote:However, as I am not a Finnish citizen, there are very less chances of me being in Finland at retirement age. I wanted to know if pension contribution for non-citizens is optional.

You do not need to be living in Finland at retirement. It will be paid regardless of your residence. The accumulate pensions are constitutionally protected so it's quite hard to take them away.

masao · Post by **masao** » Mon May 02, 2016 3:30 pm

betelgeuse wrote:
delhi_loafer wrote:However, as I am not a Finnish citizen, there are very less chances of me being in Finland at retirement age. I wanted to know if pension contribution for non-citizens is optional.
You do not need to be living in Finland at retirement. It will be paid regardless of your residence. The accumulate pensions are constitutionally protected so it's quite hard to take them away.

Yep.
Just remember that when you reach the Finnish retirement age (63 or 65 or whatever), you fill the forms and send them to whoever collecting the pension money (Ilmarinen, Varma, Veritas, or Keva).
You may use pension calculators (Eläkelaskuri) on internet to see how much you will be getting when you retire.

t, masao

delhi_loafer · Post by **delhi_loafer** » Wed May 04, 2016 8:38 am

Thank you for all the replies. This was very helpful. If In understand correctly, roughly 25% of gross salary goes to my pension savings fund. Out of 25%, 5.7% is my contribution, deducted from my gross salary. The remaining contribution to my pension savings fund, roughly 19% (450 eur/month) is paid by my employer. So if I understand correctly, my employer pays roughly 450 euro/month more to me (in form of contribution to my pension savings) in addition to my gross salary of 2400 eur/month. Please correct me if I am wrong.

betelgeuse · Post by **betelgeuse** » Wed May 04, 2016 9:52 am

delhi_loafer wrote:If In understand correctly, roughly 25% of gross salary goes to my pension savings fund. Out of 25%, 5.7% is my contribution, deducted from my gross salary. The remaining contribution to my pension savings fund, roughly 19% (450 eur/month) is paid by my employer. So if I understand correctly, my employer pays roughly 450 euro/month more to me (in form of contribution to my pension savings) in addition to my gross salary of 2400 eur/month. Please correct me if I am wrong.

Finland operates a defined benefit system.

https://en.wikipedia.org/wiki/Defined_b ... nsion_plan

This means you do not have your own pension savings fund. Your employer selects where the money goes but all the pension entities are mutually liable. Most of the money is used to pay out pensions for current pensioners. In order for you to receive money from the system, it needs to be running when you retire. It does collect some buffers to the pension funds but they are not that big in comparison to liabilities (much better than in most other countries though).

betelgeuse · Post by **betelgeuse** » Wed May 04, 2016 11:34 am

roger_roger wrote:If you are below 30 and foreigner, forget about getting pension back. Till you retire, the retirement age would be 87 and even constitutional change that foreigners cannot claim the (work based) pension from Finland.

Pessimistic but possible. However for the retirement age to be 87, people would have to live much longer and be healthier which has to be taken into account.

roger_roger wrote: Even if you die, your pension is non-transferable here i.e. your spouse cannot receive your pension like in some countries.

Incorrect.

https://www.tyoelake.fi/en/erilaisiaela ... fault.aspx

roger_roger wrote: I have made up my mind and suggest everybody to do so, be it Finn or foreigner as the ratio of pensioners to earners would be 7:3 in coming years.

Not supported by Statistics Finland.

http://www.stat.fi/til/vaenn/2015/vaenn ... 01_fi.html

Their prediction for 2060 is 29:57 (ratio of people over 65 to working people). Your numbers are so wildly different that even if details are wrong I don't think it's going to happen in the coming years.

I think young people are getting screwed but you are scaremongering.

Rosamunda · Post by **Rosamunda** » Wed May 04, 2016 5:59 pm

Some countries (eg France) have bilateral tax agreements with Finland whereby researchers not living permanently in Finland are not liable for some contributions. You need to check what agreements are in place between your country and Finland. You could call Vero and ask them.

masao · Post by **masao** » Wed May 04, 2016 6:25 pm

Rosamunda wrote:Some countries (eg France) have bilateral tax agreements with Finland whereby researchers not living permanently in Finland are not liable for some contributions. You need to check what agreements are in place between your country and Finland. You could call Vero and ask them.

Hi.
I would rather suggest to call or visit ETK (Finnish Centre Of Pensions) which co-ordinates with the pension providers in other countries.
Somewhere in their web site, I have seen an article about what pension money to expect when you are 30 now and when you retire at 87 years old.

http://www.etk.fi/en/

I do not think that Vero office is concerned with your pensions.

t, masao

Rosamunda · Post by **Rosamunda** » Wed May 04, 2016 7:08 pm

Maybe not but the poster should check the tax treaties anyway. There is a possibility that his "salary" would be exempt from tax. Worth a phone call imo.

masao · Post by **masao** » Wed May 04, 2016 11:41 pm

delhi_loafer wrote:Thank you for all the replies. This was very helpful. If In understand correctly, roughly 25% of gross salary goes to my pension savings fund. Out of 25%, 5.7% is my contribution, deducted from my gross salary. The remaining contribution to my pension savings fund, roughly 19% (450 eur/month) is paid by my employer. So if I understand correctly, my employer pays roughly 450 euro/month more to me (in form of contribution to my pension savings) in addition to my gross salary of 2400 eur/month. Please correct me if I am wrong.

Hi,
I went through Google search "Työnantajan eläkemaksu" = Employers' Pension Contribution" and
found out the similar numbers. So you are correct.
In Finland it's generally understood that if you employ a person with 20k annual salary, the employer has to pay about 40k (twice as much) altogether for the person's employment because of
the salary, insurance, and pension contribution among other expenses.

https://www.veritas.fi/tyonantajat/tyel ... yel-maksut

t, masao

masao · Post by **masao** » Wed May 04, 2016 11:55 pm

betelgeuse wrote:
delhi_loafer wrote:If In understand correctly, roughly 25% of gross salary goes to my pension savings fund. Out of 25%, 5.7% is my contribution, deducted from my gross salary. The remaining contribution to my pension savings fund, roughly 19% (450 eur/month) is paid by my employer. So if I understand correctly, my employer pays roughly 450 euro/month more to me (in form of contribution to my pension savings) in addition to my gross salary of 2400 eur/month. Please correct me if I am wrong.
Finland operates a defined benefit system.

https://en.wikipedia.org/wiki/Defined_b ... nsion_plan

This means you do not have your own pension savings fund. Your employer selects where the money goes but all the pension entities are mutually liable. Most of the money is used to pay out pensions for current pensioners. In order for you to receive money from the system, it needs to be running when you retire. It does collect some buffers to the pension funds but they are not that big in comparison to liabilities (much better than in most other countries though).

Most of the money is NOT used to pay out pensions for current pensioners.
The pension distributors (Ilmarinen, Varma, Veritas) invest their (our) money to increase the volume.
Some fruitful, others not. A couple of weeks ago, the news said that Ilmarinen's investment was at loss this year.

t, masao

betelgeuse · Post by **betelgeuse** » Thu May 05, 2016 12:37 am

masao wrote: Most of the money is NOT used to pay out pensions for current pensioners.

And your source is? I trust TELA.

"As concerns the present pension contributions in the private sector, about one euro out of six is put into a fund and the rest is used for the payment of current pensions."

"The pensions of self-employed persons are financed using the pay-as-you-go system. In other words, they do not involve funding."

It's similar for other categories.

http://www.tela.fi/en/economy/financing_of_pensions

Rosamunda · Post by **Rosamunda** » Thu May 05, 2016 7:02 am

masao wrote: In Finland it's generally understood that if you employ a person with 20k annual salary, the employer has to pay about 40k (twice as much) altogether for the person's employment because of
the salary, insurance, and pension contribution among other expenses.

Actually it is much less than that: http://www.helsinkibusinesshub.fi/fact/ ... usinesses/
Even though the employers' pension contributions have increased recently, the cost of employing someone is well under 30% of gross salary. Of course, there are other costs - such as providing office space etc, but those are more like the fixed costs of doing business.

Nowadays many employers benefit from government subsidies aimed at encouraging the employment of young unemployed people. This brings down the cost per employee considerably.

But if you have a source that shows how you get from 20K to 40K, I'd be very interested to see it.

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