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The Seafarer’s Pensions Act (MEL) – pioneer of the earnings-related pension scheme

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 arose.

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 schemes.

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.

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 retirement age.

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.

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