Pension starts to accrue for work in accordance with the Seafarer’s Pensions Act (MEL) from 1956. Until 2004, pension was calculated based on all your gainful employment under the age of 65. As from 2005, pension is calculated based on your gainful employment between the ages of 18-68.

General retirement age refers to the age when an employee is entitled to retire on old-age pension regardless of the length of service at sea.

The criteria for retiring at earned retirement age are

• the employee has accumulated a certain amount of service at sea
• the employee has reached the earned retirement age during service at sea
• the employee has accumulated within the last three years the minimum 18 months that entitle him or her to a pension

The earliest possible earned retirement age is 60 for a ship’s officer and 55 for a crew member. Earned retirement age is calculated by subtracting from the age of 63 years the months that exceed 324 MEL months of service.
Thus, the criterion for retiring at the age of 60 is 360 MEL service months and the criterion for retiring at the age of 55 is 420 MEL service months. 

Since the beginning of 2005, the MEL pension has accrued based on earnings. The pension amount is affected by the length of your working career, your earnings during your working career and your age-related accrual rate.

If you are aged between 18-52: Your pension accrues at an annual rate of 1.6% (MEL special accrual rates) or 1.5% (MEL general accrual rates) on your earnings from the beginning of the month following your 18th birthday until the end of the month when you reach the age of 53.

If you are aged between 53-62: Your pension accrues at an annual rate of 2.0% (MEL special accrual rates) or 1.9% (MEL general accrual rates) on your earnings from the beginning of the month following your 53rd birthday until the end of the month when you reach the age of 63.

If you are aged between 63-68: Your pension accrues at an annual rate of 4.5% on your earnings from the beginning of the month following your 63rd birthday until the end of the month when you reach the age of 68.

As from 1 January 2007, MEL service months are calculated primarily based on those days for which a salary has been paid. The days taken into consideration are

1) the days for which a salary was paid for performing work,
2) the days for which a salary was paid for a period of sickness,
3) annual leave days,
4) the days for which annual leave compensation was paid at the end of an employment contract,
5) the days of leave to compensate for hours worked or other equivalent paid off-duty days included in the system of rotation,
6) the days for which compensation was paid at the end of an employment contract for leave to compensate for hours worked or for other equivalent paid off-duty days included in the system of rotation, and
7) the unpaid off-duty days included in the system of rotation for an employee on a part-time pension or partial disability pension in a part-time employment contract.

When calculating the days, a calendar month always equals 30 days. However, the number of days in a calendar month can exceed 30 for those months when compensation was paid at the end of an employment contract for annual leave and leave to compensate for hours worked. The days are converted into months by dividing the number of days by 30.

Once a calendar month, employers complete a monthly report for the Seafarer’s Pension Fund on each employee’s salary and the days to be taken into consideration.

Transferring to part-time pension does not increase an employee’s retirement age. However, job alternation leave does raise retirement age.

MEL service months for the period 1 January 1991 to 31 December 2006 are taken into consideration based on the period of an employment contract and for the period before 1991, they are taken into consideration based on those days for which a salary was paid correspondingly as from 1 January 2007.

When calculating the MEL pension, an employee’s 11,1% MEL pension insurance contribution withheld from the employee’s salary is not deducted from the earnings on which the pension is based; rather, the MEL pension is determined based on gross earnings.

It is a different matter when it comes to TyEL and other earnings-related legislation that applies to work on land. When calculating earnings-based pension in accordance with this legislation, the 4.3% employee pension insurance contribution withheld from the employee’s salary (5.4% for people aged 53 and over) is first deducted from the earnings on which the pension is based and thus, the pension is determined from the reduced earnings.

Before 2005, pension accrued based on unemployment, training and rehabilitation benefits in the form of an increment for credited periods.

Since the beginning of 2005, pension also accrues from sickness allowance, special care allowance, various parental allowances, compensation for loss of earnings in accordance with motor liability insurance and employment accident legislation and job alternation compensation.

Pension accrual is based on your earnings used as the basis for your benefit, which the benefit provider calculates. The portion of earnings used as the basis for your benefit varies slightly depending on the benefit, and pension accrues from this portion at a rate of 1.5%.

In addition, pension accrues from caring for a child under the age of three and from a period of study. Pension accrues from these benefits at a fixed rate: in 2011, as if you were employed at a monthly salary of 656,08 euros. Pension accrues from a period of studies no longer than five years and your studies must conclude with completing a degree or earning a qualification.

Since the beginning of 2005, pension accrues from certain social security benefits based on the earnings and income received after a person’s 18th birthday.

Pension accrues at an annual rate of 1.5% on all income listed below.
Earnings are calculated

• for a period of maternity, paternity and parental allowance, 117% of the earnings from which the allowance is calculated
• for a period of unemployment allowance and job alternation leave, 75% of the earnings from which the allowance or compensation is calculated
• for a period of earnings-related unemployment allowance, adult education allowance, rehabilitation allowance, sickness allowance, and employment accident and motor liability insurance compensation, 65% of the earnings from which the compensation is calculated
• for a period of study, if the student completes a university or university of applied sciences degree or basic vocational qualification, and a period of caring for a child under three years of age, earnings are considered as a monthly salary of 656,08 euros (2011 level).

Since the beginning of 2005, pension accrues from a period of maternity and parental allowance as well as for a parent who is prevented from engaging in gainful employment because of caring for his or her child under three years of age and who receives an allowance in accordance with the Act on the Child Home Care Allowance and Private Care Allowance.

Pension from a period of maternity leave is calculated based on the principle that a rate of 117% of the earnings is used as the basis for your allowance. The accrual rate is 1.5%.

Pension from a period of childcare leave starts to accrue from caring for a child under three years of age. The basis for calculating pension is 656,08 euros per month (2011 level). Benefit accrues from one child at a time and only if no pension provision accrues from work.

Since the beginning of 2005, pension has accrued from certain unpaid periods, which include studying for a period lasting no longer than five years for a qualification or degree that leads to a vocation or profession (basic vocational qualification, an applied university of sciences degree or a lower or higher university degree).

Pension for a period of studies accrues at an annual rate of 1.5%. Pension accrues as if the student were employed at a monthly salary of 656,08 euros (2011 level).

Pension does not accrue if you are less than the age of 18.

No pension accrued from studies before 2005.

Pension accrues for a period of job alternation leave but somewhat less than for performing work.

Pension for performing work accrues in line with the age-related accrual rate on your earnings for each year. However, pension for a period of job alternation leave is calculated based on your earnings, which amounts to 75% of the earnings from which the compensation is calculated; the annual accrual rate is 1.5%.

Being on job alternation leave raises retirement age because since 1 January 2007, MEL service months are calculated primarily based on those days for which a salary was paid.

You only pay an insurance contribution on earnings for service at sea; in other words, not on earnings from job alternation leave.

Life expectancy refers to the number of years that a person of a certain age is expected to live, if the mortality rate remains unchanged. Life expectancy has risen tremendously in Finland. Increased life expectancy has affected the length of retirement and it has therefore vastly increased expenditure on pensions.

A specific age-related life expectancy coefficient is being introduced. If statistics indicate that life expectancy is rising, the life expectancy coefficient correspondingly reduces the pension amount for pensions starting that year. A person retiring on the reduced pension can make up the reduced amount by continuing to work.

The life expectancy coefficient will be determined for the first time in 2009 for people who reach the age of 62. The life expectancy coefficient will first affect pensions of people who reach the age of 62 in 2010.

The MEL pension is determined by applying either MEL special accrual rates (MEL, Section 66) or MEL general accrual rates (MEL, Section 72). The general accrual rates are the same as those under the Employees’ Pensions Act (TyEL).

Special accrual rates are applied when an employee retires on old-age pension or early old-age pension directly from an employment contract insured in line with MEL. The same holds true if an employee is entitled to a disability pension; the Seafarer’s Pension Fund is authorised to process the said pension application if the employee’s earnings in line with MEL in the month of the onset of disability and for the preceding thirty-six calendar months amount to no less than 21,050,40 euros (2011 level).

The Seafarer’s Pension Fund is generally authorised to process a pension application if an employee was in a MEL employment contract at the onset of disability.

General accrual rates are applied in all other cases. The MEL pension is usually determined in line with general accrual rates in instances where an employee ended MEL service before reaching the age of retiring on an old-age pension or at the onset of disability or unemployment.