MEL, Finland’s first earnings-related pension legislation for the private
sector, came into force on 1 June 1956. The Seafarer’s Pension Fund was
established to enact the legislation. Enacting pension legislation for a
relatively small employee group, albeit one with a deeply rooted tradition, was
an important step in paving the way for developing statutory earnings-related
pension provision in Finland in the 1950s.
Pioneer work on a Finnish foundation
The key figures behind the planning of MEL were Teivo Pentikäinen
(1917-2006), the then Head of the Insurance Department at the Ministry for
Social Welfare who led the planning committee, and Niilo Wälläri, the then
President of the Finnish Seamen’s Union (1938-1967).
MEL initially provided basic pension provision
Pension provision for seafarers was modest at first. It only consisted of the
old-age and disability pensions. In the early 1960s, MEL was expanded to include
the survivors’ pension and the funeral grant. Retirement age became 60 for crews
and 65 for ship’s officers. Depending on the length of service at sea, crew
members became eligible to retire upon reaching the age of 55 and the same
principle applied to ship’s officers who had reached the age of 60. The pensions
were structured according to earnings.
The State contributes towards MEL pension expenditure
Pension provision expenditure was divided among seafarers themselves,
shipping companies and the State. Seafarers and shipping companies agreed to pay
their respective shares in the form of an annual insurance contribution. The
State contribution became due for payment only when the pension expenditure
MEL solutions for changing needs
The seafarers’ pension scheme was improved in the 1960s and 1970s in the wake
of employees’ earnings-related social security. However, the MEL scheme was not
part of collective settlements in the same way as other earnings-related pension
In the 1980s, pension provision became a problem for Finnish seafarers who
worked on reflagged vessels. The amended legislation, which came into force in
1987, enabled those seafarers working on reflagged vessels to be insured with
the Seafarer’s Pension Fund. At the same time, flexible pensions were added to
MEL was also amended in the major pension reform of 2005 to bring it in line
with the general policies of the earnings-related pension scheme. The clear
benefit of the reform is the amendment to pension accrual regulations, which
considerably increases the correlation between paid insurance contribution and
accrued pension. As a result, there is no longer any need to limit the maximum
amount of a pension to 50%, an advantage felt by long-serving seafarers insured
in line with MEL. The reform also safeguarded the special features of the MEL
pension, such as the slightly higher accrual rates for pensions than in other
earnings-related pension schemes and the right to the so-called earned
Seafarers' pension terms brought closer to other professions - legislative changes in 2016 and 2017
The Ministry of Social Affairs and Health (STM) set up a working group in 2013 to develop the benefits and financing of the Seafarers' pension system. The working group presented a unanimous proposal in the summer of 2014. The working group was set up due to a suggestion from another working group that was set up in 2013 by the Ministry of Finance to investigate the operating conditions, aid policies and adaptation measures related to shipping (Ministry of Finance publications 22/2012). The working group's responsibilities were thus related to a larger project examining the state aids to shipping.
The labour market organizations' pension agreement
The seafarer's pension reform working group met once more in the fall of 2014 due to the pension agreement reached by the labour market organizations in October 2014. The pension agreement had two immediate effects on the working group's proposal: the transitional period for seafarers' lowered retirement age was extended to 9 years and the pension contribution deductions aka PTEL deductions do not apply to seafarers.
The most important change in the pension agreement concerns retirement ages. In addition, the pension accrual rates are changing and statutory pension schemes, including the MEL, will include new pension forms.
After these recent changes and the long transition period, seafarers' pension schemes will be similar to those of other professions.