OP Financial Group CEO Timo Ritakallio confirms that customers will receive smaller bonuses next year compared to current levels. The Finnish banking group announced widespread changes to its owner-customer benefits program today.
The bank's bonus calculator reveals that customers will earn €280 in bonuses from €100,000 in transactions next year. This year, the same amount generated €350 in rewards.
When asked if comparing next year's bonus level to this year's creates misleading communication, Ritakallio defended the approach. He stated the bank consistently communicates that the baseline is the 2022 level of 0.25 percent.
Starting next year, OP bonuses will become subject to capital income tax. The normal accrual rate of 0.25 percent was last used in 2022. Since then, the group has paid higher bonuses each year.
Bank officials explained they previously offered additional benefits to owner-customers during 2023-2025. These were temporary advantages decided annually.
OP Group increased this year's bonuses by 40 percent compared to the 2022 normal level. Owner-customers also receive daily banking services without monthly fees.
Ritakallio previously promised that bank owner-customers would continue receiving at least equally good benefits as before. One option involves paying higher bonuses to offset tax impacts.
The banking group announced comprehensive changes to owner-customer benefits today. Reforms affect both the bonus system and other customer advantages.
How customers can use OP bonuses will change significantly. Previously, bonuses could only cover banking and insurance service fees. Starting next year, customers can receive bonuses as cash or invest them in funds.
According to Ritakallio, customers need take no action due to these changes. If no changes are made, OP will automatically apply tax withholding and use bonuses for banking and insurance payments starting next year.
Customers can modify how their bonuses are allocated across different purposes. They might prioritize insurance payments over banking fees, reversing the previous requirement to use bonuses first for banking costs.
Ritakallio noted customers can also transfer bonuses to bank accounts for loan repayments.
The reforms stem from changes in bonus taxation practices. OP also aims to simplify its bonus program and increase transparency.
Beginning next year, OP bonuses will constitute capital income subject to taxation for owner-customers.
The tax reform means benefits from loans, savings, and investments lose tax exemption when used for services other than their original source. For example, bonuses from mortgages are no longer tax-free when applied to insurance payments.
OP has paid nearly four billion euros in bonuses to owner-customers since 1999. Last year's bonus payments totaled 314 million euros.
The changes affect over two million owner-customers.
The tax reform will cost OP Financial Group approximately 100 million euros, according to Ritakallio. The tax withholding rate is 30 percent.
The tax changes follow a 2021 initiative by the Finnish Competition and Consumer Authority to remove tax benefits for banking and insurance sector bonuses. The authority argued the tax treatment favored OP at competitors' expense, estimating the tax benefit at around 100 million euros.
Previous tax authority interpretation held bonuses tax-free when used for the same company's service or insurance fees. Pohjola Insurance belongs to the OP Group, allowing bonus use for insurance payments.
The timing raises questions about whether customers truly understand they'll receive smaller bonuses despite the bank's positive messaging about increases from the 2022 baseline.