Finland's incoming universal benefit system is set to reduce monthly income for some recipients of the popular partial old-age pension by up to approximately 70 euros. The change, effective from the start of May, replaces basic unemployment allowance for jobseekers with the new 'yleistuki' or universal benefit, introducing stricter income rules that will now count partial pension earnings against the support payment.
From Pension Boost to Benefit Reduction
Under the current system, individuals can receive a partial old-age pension without it affecting their basic unemployment allowance. The new universal benefit, however, comes with a strict monthly income limit of 311 euros. According to information published by the earnings-related pension company Elo, any income exceeding this limit will reduce the universal benefit by 50 percent of the excess amount. This creates a direct financial impact for those who combine a partial pension with unemployment support, a situation that was previously more financially advantageous. Sara Salomaa from Elo's communications department confirmed the mechanism but noted the exact number of affected individuals is unclear.
The Mechanics of the New Calculation
Universal benefit is set at 37.21 euros per weekday, averaging about 800 euros per month, matching the basic level of existing unemployment benefits. The pivotal change lies in its interaction with other income. Elo provides an example calculation on its website to illustrate the potential effect. For a person receiving a partial pension that brings their total monthly income above the 311-euro threshold, every euro above that line cuts their universal benefit by 50 cents. This can lead to a scenario where a pensioner sees a significant net decrease in their total monthly income compared to the previous system. The ministry of social affairs and health states the universal benefit is paid to unemployed jobseekers who are not entitled to earnings-related unemployment allowance or whose entitlement has expired, provided they need financial support.
A Phased Impact on Different Groups
The immediate negative effect will hit those currently on basic unemployment allowance who also receive a partial pension and who will transition to the universal benefit in May. For those on earnings-related unemployment allowance, the partial pension does not affect their benefit amount even after the change. However, a second wave of impact is expected later, tied to the removal of extended earnings-related allowance days. 'For people born in 1965 or later, the extended allowance days will be removed,' Elo's website explains. 'This can create a situation where a person has taken a partial old-age pension and their earnings-related allowance ends before they reach full retirement age. Then they will start receiving universal benefit, the amount of which may be reduced by the partial pension.' Self-employed persons, who have no right to extended allowance days, could feel the effects as early as this year.
Uncertainty Over the Scale of the Change
While the mechanism and potential loss are clear, the scale of the impact remains uncertain. Elo and officials lack precise data on how many partial pension recipients will see their incomes fall. 'We unfortunately do not have information on how many people the decreasing income effect might hit,' Sara Salomaa told Elo's communications. She estimates that, at least initially, the affected group is unlikely to be very large. This uncertainty leaves a segment of pensioners, particularly those planning their transition from unemployment to full retirement, navigating a new and less predictable financial landscape. The policy shift underscores the complex interplay between pension reform and unemployment security, where a change designed to simplify one system creates new complications in another.
Navigating the Transition to Full Retirement
The change places a particular burden on those in the transitional phase of their working lives. Individuals who opted for a partial pension to gradually reduce their workload now face a potential cliff edge in their income if their unemployment benefits expire before they reach full retirement age. The removal of the safety net provided by extended earnings-related allowance days for younger cohorts intensifies this risk. The government's move to a universal benefit system aims for simplification, but its interaction with the pension system reveals unintended consequences for a specific demographic. The situation will require careful financial planning from those affected, as they must now account for the 311-euro income ceiling when combining pension and unemployment benefits.