YEL is more than a retirement pension – it offers security throughout a career
/ Article
At the very beginning of their entrepreneurial career, an entrepreneur has a big decision to make – how to take out YEL insurance, that is, a self-employed person’s pension insurance. The decision is complicated by the conflicting advice being given – some praise the insurance, while others are ready to bin it.
In discussion forums on social media, the most extreme voices are usually the loudest. Those who have at one point taken out YEL insurance say very nice things about it, while others swear by independent savings. It is no wonder that an entrepreneur on a tight budget is confused.
– You should remember that not all advice is based on fact. Various beliefs and misunderstandings colour the discussion and create uncertainty, says Maria Ihalainen, sales manager at the Elo pension insurance company.
In reality, the income confirmed for the insurance determines the level of earnings at many different stages of life: an entrepreneur’s social benefits, such as parental benefit and sickness benefit, are based on the amount of declared income. The corona period has also demonstrated the importance of YEL for an entrepreneur’s unemployment security.
The declared YEL income also secures the entrepreneur’s livelihood if their health fails and they become unable to work.
– People often think that incapacity to work only affects others. However, each of us should think about our livelihoods in the event that something happens. None of us is made of titanium, and any one of us may have to face something overwhelming, says Ihalainen, urging people to calculate the effects of long-term disability on their own finances.
The vocational rehabilitation included in YEL insurance aims to ensure the continuation of an entrepreneur’s career in the event of prolonged disability.
– This can take the form of retraining or the improvement of working conditions, as was the case with one of our clients, whose vision deteriorated. We reimbursed the entrepreneur for new lighting in their workspace, which enabled them to continue working despite their deteriorating vision.
– When starting entrepreneurial activities, and when a company does not yet have customers, people often declare a low income. However, it is a good idea to reassess the income six months after first taking out the insurance, says Ihalainen.
– It is essential to understand the value of your own work. If you are a full-time entrepreneur, and your entrepreneurial activities take off after a slow start, you should adjust your declared income.
Many become aware that they should change their declared income when a fellow entrepreneur recommends it. Lurking in the background may be, for example, a fellow entrepreneur’s personal experience of falling ill or some other event in which they have needed their YEL insurance.
– An entrepreneur should know the coverage of their own YEL insurance, and not just pay it based on a randomly set income. The coverage should be proportional to the entrepreneurial activity. You can find out what your insurance covers by requesting an estimate from Elo.
You can easily change your declared income whenever you want using Elo’s online service. If you have questions, contact the experts at Elo.
– When you no longer receive your income from your business, it is difficult to keep the lifestyle you are accustomed to, if your entire accumulated assets are tied up in a home, summer cottage or car, says Ihalainen.
An underinsured entrepreneur may have to continue working beyond retirement age. It is difficult to increase your accrued pension in the years before the retirement pension.
– It is a good idea to start minimising risks early on by relying on correct information. With YEL insurance, time works for you.
Ihalainen points out that both entrepreneurs and employees accrue the same amount of pension per year. For employees, the accrual is calculated from their annual earnings, while for entrepreneurs, from their declared income.
– If you insure yourself for the minimum annual income of just over 8,000 euros, this would correspond to a monthly salary of 670 euros. As an entrepreneur, are you content to receive this level of coverage?
What if, to support modest YEL insurance, you have saved money through investments, as so many are advising?
– Investing is in itself a good thing. However, YEL should not be compared to an investment; it is insurance. It offers security at the various stages throughout a career. The realisation of assets in a tight spot can lead to a situation in which you end up selling at a loss. At the same time, you are eating away at the capital reserved for later.
– You should remember that not all advice is based on fact. Various beliefs and misunderstandings colour the discussion and create uncertainty, says Maria Ihalainen, sales manager at the Elo pension insurance company.
YEL offers security for various situations
One of the most common misconceptions about the YEL insurance is that it only affects the retirement pension of entrepreneurs after their careers.In reality, the income confirmed for the insurance determines the level of earnings at many different stages of life: an entrepreneur’s social benefits, such as parental benefit and sickness benefit, are based on the amount of declared income. The corona period has also demonstrated the importance of YEL for an entrepreneur’s unemployment security.
The declared YEL income also secures the entrepreneur’s livelihood if their health fails and they become unable to work.
– People often think that incapacity to work only affects others. However, each of us should think about our livelihoods in the event that something happens. None of us is made of titanium, and any one of us may have to face something overwhelming, says Ihalainen, urging people to calculate the effects of long-term disability on their own finances.
The vocational rehabilitation included in YEL insurance aims to ensure the continuation of an entrepreneur’s career in the event of prolonged disability.
– This can take the form of retraining or the improvement of working conditions, as was the case with one of our clients, whose vision deteriorated. We reimbursed the entrepreneur for new lighting in their workspace, which enabled them to continue working despite their deteriorating vision.
Declared income can be changed
Contrary to common belief, the income confirmed for YEL insurance can be adjusted according to entrepreneurial activity. As entrepreneurial activity grows, the income should increase accordingly, and vice versa, if necessary.– When starting entrepreneurial activities, and when a company does not yet have customers, people often declare a low income. However, it is a good idea to reassess the income six months after first taking out the insurance, says Ihalainen.
– It is essential to understand the value of your own work. If you are a full-time entrepreneur, and your entrepreneurial activities take off after a slow start, you should adjust your declared income.
Many become aware that they should change their declared income when a fellow entrepreneur recommends it. Lurking in the background may be, for example, a fellow entrepreneur’s personal experience of falling ill or some other event in which they have needed their YEL insurance.
– An entrepreneur should know the coverage of their own YEL insurance, and not just pay it based on a randomly set income. The coverage should be proportional to the entrepreneurial activity. You can find out what your insurance covers by requesting an estimate from Elo.
You can easily change your declared income whenever you want using Elo’s online service. If you have questions, contact the experts at Elo.
No regrets about paying fair YEL contributions
Few entrepreneurs have regrets about paying insurance contributions that are at a sufficient level in relation to their income. While retirement age may seem distant, it is worth preparing for it in advance.– When you no longer receive your income from your business, it is difficult to keep the lifestyle you are accustomed to, if your entire accumulated assets are tied up in a home, summer cottage or car, says Ihalainen.
An underinsured entrepreneur may have to continue working beyond retirement age. It is difficult to increase your accrued pension in the years before the retirement pension.
– It is a good idea to start minimising risks early on by relying on correct information. With YEL insurance, time works for you.
Ihalainen points out that both entrepreneurs and employees accrue the same amount of pension per year. For employees, the accrual is calculated from their annual earnings, while for entrepreneurs, from their declared income.
– If you insure yourself for the minimum annual income of just over 8,000 euros, this would correspond to a monthly salary of 670 euros. As an entrepreneur, are you content to receive this level of coverage?
What if, to support modest YEL insurance, you have saved money through investments, as so many are advising?
– Investing is in itself a good thing. However, YEL should not be compared to an investment; it is insurance. It offers security at the various stages throughout a career. The realisation of assets in a tight spot can lead to a situation in which you end up selling at a loss. At the same time, you are eating away at the capital reserved for later.
FACT
You must take out YEL insurance within six months of the start of business activities if:
● you have reached the age of 18 but are below the upper age limit for the insurance (varies between 68 and 70 according to the year of birth)
● you are self-employed
● your entrepreneurial activity lasts for at least four consecutive months
● your income exceeds €8,063.57 in 2021
You must take out YEL insurance even if you are self-employed part-time in addition to being a salaried employee.