PUBLIC SECTOR PENSION SCHEME OF KEVA Country: Finland. Database Update: May 2009

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1 Database Update: May 2009 Name of Scheme: No specific name; based on Local Government Pensions Act Managing Institution: (orig.) Kuntien eläkevakuutus, (engl.) Local Government Pensions Institution Address: POB 425, FI Helsinki, Finland contact persons: Anne Perälehto-Virkkala, Jari Sokka Web site:

2 1. DESCRIPTION OF THE SCHEME Scheme features Basic or supplementary? (Please, choose one) Basic. Supplementary. Combination of both systems Compulsory or voluntary? (Please, choose one) Compulsory. Voluntary. Combination of both (i.e. compulsory membership with possibility of a supplementary voluntary insurance; see ) Governed by: (Please choose as adequate) Law. Collective agreement. Both. Others (please specify): Please, indicate legal basis or collective agreement: System classification: a. Please choose one: Defined Benefit (DB). Defined Contribution (DC). Mixed b. Please choose one: Pay As You Go (PAYG). Funded. Hybrid c. Method of acquiring rights (Please choose one): Points Annuities Other (please specify): - 2 -

3 Taxation principles (regarding Contributions/Returns/Benefits): EET (Exempt/Exempt/Taxed). ETT (Exempt/Taxed/Taxed). TEE (Taxed/Exempt/Exempt). Others (please specify): Fiscal advantages (for employers, employees and for the pension institution), if any apart from the ones mentioned in : NONE Legal position regarding EU legislation. Please indicate, answering yes/no, under which EU-legislation your scheme falls. The following classification maintains the current subdivision into three pillars: a. Regulation 1408/71(in the future: Regulation 883/2004) - statutory application of this Regulation or by notification of the Member State: YES b. Directives for supplementary pensions, such as Directive 98/49 EC, Directive 2003/41 ( Pension Fund Directive ), Proposal of a Directive to improve portability of supplementary pension rights COM(2005) 507 ( Portability Directive ): NO c. Life insurance Directives (in the future the Solvency II Directive ): NO 1.2. Population involved Employers a. Who they are (e.g. ministries, public bodies, local governments, church staff, special entities employing teachers, police, fire-fighters, other particular entities for particular public services like energy, water, public transport, hospitals or childcare): MUNICIPALITIES, JOINT MUNICIPAL BOARDS, MUNICIPAL ASSOCIATIONS, FOUNDATIONS AND LIMITED LIABILITY COMPANIES b. Number of employers:

4 1.2.2 Employees a. Staff working for the above mentioned employers indicate if there are particular conditions like specific status, minimum working time, specific labour contracts minimum age for membership? b. Number of active employees: c. Number of retired employees: d. Number of former employees with deferred rights: N/A 1.3. Governance Decision-making body (Boards, trustees, etc, giving a brief description: number of components and their role, appointed and/or elected, renewal procedure ): 1) COUNCIL (APPOINTED EVERY 4 YEARS BY MINISTRY OF FINANCE, 30 MEMBERS REPRESENTING MUNICIPAL EMPLOYERS AND EMPLOYEES; 2) BOARD (ELECTED BY THE COUNCIL EVERY 2 YEARS, 9 MEMBERS) Supervision (indicate the supervisory entities overseeing the scheme, if any, pointing out the nature of their supervision financial, legal ): GENERAL SUPERVISION: MINISTRY OF FINANCE; SUPERVISION OF FINANCIAL PLANNING AND INVESTMENT OPERATIONS: FINANCIAL SUPERVISORY AUTHORITY 1.4. Basic financial data Income a. Global amount of contributions: b. Scheme s financial results, its return on investments in net/gross terms (for the last year, last 5 years, last 10 years, last 15 years, last 20 years, since inception as it results feasible) : 2008: -20,6 %, : 3,4 %; : 2,0 % REAL RETURN c. Reserves (for funded schemes). If possible, including legal funding requirements, funding ratio : (per 31/12/2008) - 4 -

5 1.4.2 Expenditures a. Global amount of benefits paid to beneficiaries as defined in 2 to 6 (i. e. old age pension, disability pension, early retirement, survivors pension for spouse or children), in local currency and/or : b. Administrative costs (if mentioned in Annual Report can be expressed as an amount, a percentage of the capital, a percentage of the total annual contributions, a percentage of the annual benefits, or any other figure): c. Other expenses (if representative): Asset Allocation (roughly, as a percentage with no decimals): a. Fixed Income: 49 % b. Equity: 36 % c. Real Estate: 11 % d. Cash: % e. Others (specify if you consider it necessary): 4 % TOTAL: 100% 1.5. Contribution rates Employers: a. Is the contribution a percentage of a base? YES b. If so, which base is the contribution calculated upon? TOTAL SUM OF WAGES AND SALARIES c. If not, how is the contribution calculated? d. Is there a ceiling for the amount of the contribution? NO e. If so, how is it calculated? f. Is the contribution compulsory? YES - 5 -

6 1.5.1.g. If so, is there any additional requirement (e.g. it must be the same amount as the employee s contribution, or there is a vesting period, or )? NO Employees: a. Is the contribution a percentage of a base? YES b. If so, which base is the contribution calculated upon? WAGES AND SALARIES c. If not, how is the contribution calculated? d. Is there a ceiling for the amount of the contribution? NO e. If so, how is it calculated? f. Is the contribution compulsory? YES g. If so, is there any requirement (e.g. it must be the same amount as the employer s contribution, or there is a vesting period, or )? NO Possibility of paying additional/optional contributions: a. The scheme admits (tick as appropriate): AVC (Additional Voluntary Contributions) Deferred compensation (part of the salary is transferred into the pension scheme in order to buy additional pension rights) Purchase of Additional Points Others (please specify): b. Are the optional contributions administered separately? N/A c. Indicate if the survivor coverage is subject to voluntary contribution (see 5.1): NO - 6 -

7 1.6. Purchase of extra years / validation of past services Extra years: a. Is it possible to buy extra years (e.g. a person works for an institution during the fifteen years prior to retirement, while he is 50 to 65 years old; the institution s pension scheme could require a twenty years contribution in order to get a partial pension, or a full pension, or Is it feasible to buy -pay for them, usually after an actuarial calculation- the needed extra five years? Or even some more if the person wants to increase their pension?)? NO b. If so, how is it done? Past services: a. Is it possible to validate past services (e.g. a person works for an institution during fifteen years but has not joined its pension scheme; after this time, she/he decides to join the scheme: Is it possible to make up for the unpaid contributions of those fifteen years?)? NO (MEMBERSHIP IS COMPULSORY) b. If so, how is it done? 1.7. Portability Is it possible to execute transfers to the scheme? Are transfers taking place at present (if they are possible and they are not being carried out, please explain why)? NO (ALSO "NO" TO QUESTION NO REPLY FIELD PROVIDED) If transfers are possible, describe briefly transfer conditions and process (please differentiate among national and cross-border level whenever it is feasible and relevant): - 7 -

8 2. OLD AGE PENSION. 2.1 Qualifying conditions Retirement age: a. Legal compulsory age: (FLEXIBLE) b. Scheme compulsory age: c. Minimum age: d. Maximum age: e. Average age: 63 FOR OLD-AGE PENSIONS f. Are there different rules regarding certain groups (women/men, employed/unemployed, disabled persons )? If there are, please describe: DISABILITY PENSION (NO MINIMUM AGE), UNEMPLOYMENT PENSION (60 YRS), PART TIME PENSION (58) Qualifying period: a. Minimum period of membership -and/or at work in case it is relevant- (in years): NONE b. If it exists, please indicate if it is in the process of decreasing or increasing: 2.2. Calculation method DB scheme a. Calculation formula: 1,5 % ACCRUAL UNTIL 53 YEARS, 1,9 % ACCRUAL BETWEEN 53 AND 63, 4,5 % BETWEEN 63 AND b. Brief description of the elements used in the formula (if they are not used, simply delete as adequate; if it is not considered, simply add it in the Others section): - Pensionable salary: ANNUAL EARNINGS - Accrual rate: SEE ABOVE - Vesting period, if any: NONE - Minimum working time, if any: NONE - 8 -

9 - Minimum number of years guaranteed, if any: NONE - Maximum number of years, if any: NONE - Minimum age, if any: 18 - Maximum age, if any: 68 - Others: c. Consequences of early/late retirement: Early old-age pension is possible from the age of 62. The reduction in 0.6 per cent per month. Retirement can be postponed beyond the age of 68. The pension is then increased by 0.4 per cent for each month for it is postponed DC scheme / or NDC (notional defined contribution) scheme a. Is there a guaranteed return? b. Please indicate the existence of any of the following (for any points not considered, simply delete as appropriate; if any points are not included, simply add it in the Others section): - Vesting period, if any: - Minimum working time, if any: - Minimum number of years guaranteed, if any: - Maximum number of years, if any: - Minimum age, if any: - Maximum age, if any: - Others: c. Consequences of early/late retirement: d. Extra information affecting the calculation (unisex/differentiated tables by gender, different calculation depending on age or seniority ): Pension amount a. Is there a minimum guaranteed benefit? NO b. Is there a limited maximum benefit to be paid? NO Benefit payment/s: (please choose as adequate) Monthly payments. Lump Sum. Calculation formula: - 9 -

10 Bonuses (e.g. an extra payment at Christmas): Comments (possibility of various lump sums ): Benefit payment mechanism: (please choose as appropriate) Benefits are paid directly from the fund (e.g. as in a PAYG scheme). The individual economic rights add up to a determined amount which is converted into an annuity. Members are allowed to purchase annuities from a supplier. Comment on any other possibility: Nature of annuities: (please choose as adequate) Lifetime. Deferred. Variable. Comment on any other possibility:

11 2.3. Flexible or part time pension Can the pensioner continue at work while receiving a pension? Full time Part time No If so, what are the conditions to be met? a. Minimum age: NO b. Minimum period of membership/at work: NO c. Others (fill in as you consider appropriate): OLD-AGE PENSION; IN CASE OF DISABILITY PENSION THERE ARE SALARY LIMITS Calculation of the pension (is any reduction factor used?): Is there a minimum pension? NO Is the pension received while working a monthly payment or a lump sum? MONTHLY PAYMENT Is there a pension abatement over a certain salary level? NO If there is such abatement, how is it calculated? 2.4. Indexation Kind of indexation: (please choose one) Price indexation. Calculation: Wage indexation. Calculation: Other indexation. Calculation: ACCRUED RIGHTS BEFORE RETIREMENT: 80 % WAGES + 20 % PRICES; PAID PENSIONS: 20 % WAGES + 80 % PRICES No indexation

12 Conditions applicable to early leavers for the indexation of deferred pension rights (if any): 80 % WAGES + 20 % PRICES (INDEXATION OF ACCRUED RIGHTS DOES NOT DEPEND ON WHETHER THE PERSON IS STILL WITH THE SCHEME) 2.5. Distribution of rights in case of divorce: Are the pension rights split between spouses/partners in case of divorce? NO If it is so, please give a brief description of how the division is carried out:

13 3. DISABILITY PENSION Qualifying conditions: (please choose one) Notion of disability linked to job related incapacity (incapacity to carry out the usual job) Notion of disability linked to work related incapacity (incapacity to carry out any job) Others. Please explain: 3.2. Pension calculation: The calculation is the same calculation as for retirement pension? NO Are there any extra pension rights? YES Does the cause of the disability affect pension calculation (for example, does a work related disability provide better pensions)? NO

14 4. SURVIVOR S COVERAGE 4.1. Surviving spouse (or partner) pension Accrual of survivor s pension rights a. The survivor coverage is: (please choose one) Compulsory Optional b. At the time of accruing survivor s pension rights, are there different options/alternatives? THE SURVIVOR PENSION IS MEANS-TESTED AGAINST SURVIVOR'S OWN ACCRUED PENSION RIGHTS Qualifying conditions (these ones or any other): a. Age: The spouses had married before the deceased reached the age of b. Minimum marriage duration: NONE if the spouses have or have had a child together. If not, 5 years c. Any other requirement: SOME VERY DETAILED ( NOT INCLUDED HERE) d. (Legal) Recognition of the following partnerships: (choose as adequate, as many as it is necessary) Spouses of different gender admitted (married). Spouses of the same gender admitted (married). Civil partners of different gender admitted (unmarried). Civil partners of the same gender admitted (unmarried). Couples of different gender with no legal liaison admitted. Couples of the same gender with no legal liaison admitted e. Divorced spouses/partners: e.a. Are they entitled to the pension? If the deceaced was liable to pay alimony to a former spouse e.b. Is there any (legal) pension sharing mechanism between present and past spouses/partners? NO

15 4.1.2.f. If a widow/divorced/partner remarries, does she/he lose any pension entitlement? YES, IF UNDER 50 YEARS OF AGE g. Is personal income taken into account at the time of calculating the surviving spouse pension? YES (SEE b ABOVE) Calculation method (considering the different possible alternatives): Distribution of rights in the case of divorce a. Are the pension rights split between spouses/partners in the case of divorce? NO b. If it is so, please give a brief description of how the division is carried out: 4.2. Children pension Qualifying conditions a. Age limits: BELOW b. Time duration: NO c. Possible extensions and their causes (e.g. disabilities, studies ): NO d. Is personal income taken into account at the time of calculating the child pension? NO Calculation method:

16 5. ADDITIONNAL INFORMATION Comments on recent, ongoing or future reforms: 5.2. Comments on any of the previous sections (please include the section heading references): IT IS NOT POSSIBLE TO GIVE DETAILED DESCRIPTION OF PENSION ENTITLEMENTS; THEREFORE MANY ANSWERS DESCRIBE ONLY THE MOST COMMON SITUATION 5.3. Comments on any possible interesting information not considered in the questionnaire: 5.4. Comments on any possible restriction on the information to be displayed (e.g. section 1.4. to be accessible to other EAPSPI members only, or to the General Secretariat and Board only, or we will not answer that section as we consider it is for the member s internal use only, or to be used for statistical purposes only ). If nothing is declared, the General Secretariat understands that the authorisation to use and display the information is given, always limited to it being used according to the aim and mission of the EAPSPI, and for no commercial use of any kind: