Alright, welcome to the Negotiation Club. I have perhaps Finland's biggest YEL reformers here as guests. Liisa Hanén for the first time.
Hi. Hello. Hello. You represent these micro-entrepreneurs. Tell me your association's name again. Micro and Solo Entrepreneurs Ry. Familiarly Myry.
Has it already reached the level of Suomen Yrittäjät and well, Etla and EK in the influencer field? It probably depends on how it's measured, but well, let's say a small step closer. Yeah. And then Jocka Träskbäck for the third time, hi. Thanks for the invitation once again. Yeah, and I have to say that you actually started my short video period. So, so let's put our short video here. This
is very popular. The current YEL is like throwing banknotes from a Swedish ferry into the sea, and that's true with the difference that from a ferry, throwing banknotes into the sea is much more fun than this YEL. Had you watched that video when some construction crew throws those... Oh, furniture. It's intense. It's intense. Maybe they were fed up with YEL then.
But the current system is certainly such that we can't continue with this. Uh, here banknotes and furniture are being thrown from a Swedish ferry into the sea. Oh right, this YEL classic. Yeah, yeah. It got a lot of classic status. Yeah, yeah.
So here is this small, maybe even micro-entrepreneur construction crew, having a party and throwing that furniture from that Swedish ferry. So Jocka, you've had this piece of wisdom for a long time about this YEL reform or the YEL system. Yeah, I thought about it back then, years ago already, thinking why on earth pay YEL when you don't get anything back, so I then stated in some discussion that it's a bit like throwing banknotes from a Swedish ferry into the sea. Except that throwing banknotes from a ferry into the sea is much more fun than
paying YEL. The benefit is the same. Yeah. And Liisa, well, we have sparred a bit. I've actually received this—I'm not a member, but I got a little benefit for free. So we sparred about me being this multi-location guy. My TyEL is paid by Trans Corporate Finance Oy. So I'm a perfectly respectable salaried employee. Then I thought that this business, meaning this publishing activity of Holdari's DCM Capital on the Negotiator channel,
is starting to be alarmingly successful, so I gave you a ring and asked for some advice on how we can get a reasonable YEL contribution for this, so maybe you could tell me, is this a common problem and sort of how can we keep the YEL contribution in check? It's a very common problem and of course I help all entrepreneurs in need, so it doesn't necessarily require our membership at all. I feel that this is in a way kind of like a social obligation for me,
since I've pretty much started this discussion about this YEL reform.
Of course, I want to emphasize right away that the purpose isn't to aim to pay the lowest possible YEL. I mean, that's not like the idea of the system, and in a way, that's why we're partly in trouble, but let's say that since this current law and its interpretation is so shockingly unfair and unreasonable, then in a way from that perspective, it's actually almost mandatory to advise entrepreneurs on
how they won't get these incredibly multiplied, I mean totally absurd payments, so from that perspective, I have indeed helped nearly 5,000 entrepreneurs according to my own calculations. Yeah. But anyway, let's give a few concrete ones here, we'll get back to whether this is even necessary soon, because the government's mid-term review made a few changes, but indeed I feel that since I have a real
salary anyway, so in a way this is like a bit of unnecessary extra, and in a way should I really have to pay like to the max for every single bit of extra work?
Somehow it's just a very alien alien thought to me, since this really is just a side hustle for me, I just felt that the income threshold was only barely exceeded, but maybe that minimum would be the appropriate level. In these matters, one tip is that you can ask all the pension insurers for it and then choose. Sure you can ask, but in itself, competitive bidding isn't really
possible, because YEL insurance is a statutory pension insurance contribution, so bidding or changing pension companies doesn't help much. You basically get the same from everyone, but of course there are quite a few differences in customer service. You definitely don't get the same from everyone, I can assure you of that. They don't coordinate—the good part. They aren't a cartel. They read the same law, they think they're making the same interpretations, but they don't end up with the same result. So this
current system is like a joke in many ways, because it uses this—is it camel breeding, I think, that's supposed to be the most efficient? Now, I didn't stoop to calling this studio work camel breeding, however, but these median and business limits are quite open to interpretation. They are very interpretive, and I would say that's where the greatest injustice actually comes from, that if we just went by actual earned income instead of these weird
estimates where they look at revenue, profession, work effort, and working hours, then that's exactly where the problems come from; it's not at all unambiguous, and some know how to use the system, others don't, some know how to justify it, others don't, so it's not it's not equitable in any way. Yeah. I was then still a starting entrepreneur. I have one YEL year in my history, so I was happy to notice that, well, there are still three starting
entrepreneur years left. So I probably ended up at a local minimum in my payment, which was actually really important to me, because it was a bit open to interpretation whether I'd get it at all, so it just felt kind of silly if it would have then somehow turned into something completely stupid, that payment. Yes, based on the messages I've probably had hundreds of calls and discussions on the subject, so yes, a couple of pension insurers do stand out in those incorrect
decisions. So when they've had to hire a large group of officials, resulting in an incredibly large amount of practical power to exercise public authority, the fact that for example these sole traders, like a massage therapist, have their turnover defined as earned income and then based on that pension contributions are slapped on, it really concentrates on a few specific
pension companies. So there is a difference in that sense, it's probably just luck then, whether you get a good or a bad pension insurer.
But this actually brings us to the core of the whole YEL question at the moment, the fact that currently these pension contributions for entrepreneurs aren't based on any real figure, they are just slapped from a lottery machine and then compared a bit to the private sector median and then some figure comes out of the lottery machine which is then enforceable, if you can't negotiate it to be more sensible with the pension company. And this is the biggest problem in this whole YEL reform right now.
Yeah. Let's take that now, we are all quite, or at least Liisa and I are probably completely neutral, but Jokka, since you are a member of the Coalition Party, I must make a disclosure here, or you did succeed in those regional elections, so yeah, well they went really well, both the regional and municipal elections in Tampere went well, let's just say I didn't expect such a good result, but now I'll get to influence things from positions where surely
my own decisions and actions and views will have some impact in the future. Yeah. You'll get to talk with 'Party-Ilmari' possibly about budget matters. Yeah, Ilmari seems to be the next Mayor of Tampere, so we'll be cooperating. Of course, in Tampere there has always been good cooperation between the SDP and the Coalition Party, unlike perhaps elsewhere in Finland, so cooperation will surely continue. Should we, Liisa, grill Jokka a little bit though, as a Coalition Party member about this mid-term decision? I actually got a
call, that you are now so much on the party's side taking this responsibility, so did this mid-term review, in your opinion, solve this Y-problem? No. Well, it didn't solve it, but it was certainly a very positive like sign that they want to reform it. At least I received it with great joy, and the Micro and Sole Entrepreneurs association did celebrate the fact that it was there, but it wasn't a solution. It was just like a strong
message that if it had already been said before that the system needs to be reformed, now there's more of a mandate.
Now it's really going to be reformed. So it was a good thing anyway. But this was probably part of how many things were, were '26, like moderate marginal tax cuts, and some are then '27, like this corporate tax cut to 18%, but this was still, in my opinion, still a bit in that 'to be done later' category, so what was actually decided there concretely? Well, as Liisa just well noted, this was a good indication that they want to do something
and the measures recorded there are indeed in the right direction, but the biggest problem with this mid-term review announcement was the schedule. It's not possible for us to wait until the year '29, when we have companies there that have already received these mindless, baseless decisions. They have to fight for every euro now, and I think it was, was it 16,000 companies that went under in the last quarter of last year
or were closed down? So it's an insane figure, and this indicates that this YEL is a big part of why our companies are disappearing, and the fact that in '26, based on the investigator's results, we'll start drafting legislation to take effect in '29 – this schedule is just impossible. At that point, whatever the corrective measures are, I hope they're sensible, and I do know that there are some good things
coming to the table, so when they are reviewed next year, the decision must be made that they take effect either during '26 or at the start of '27 at the latest. If the schedule announced in the review, stating not until '29, when these current transitions end, then it's game over for a large portion of our companies. Somehow in Parliament they don't realize how difficult a situation Finnish small entrepreneurship
is in right now, and those solutions are needed quite quickly. Then again, what did come out of this was the, well, 4,000 euro increase cap until the year '29. That was—that was a very positive signal indeed that came out. So, in a way, this YEL crisis won't get worse from here, and there won't be many new victims, but the problem is that a ridiculous number of those erroneous decisions have already been made and we
should try to prevent the consequences from worsening, if one can put it that way. Of course, I think it's like desirable. I hope with all my heart that the law could be reformed sooner, but that now we're actually getting a good segue into how complex an issue this is.
So in a way, no one hopes that it would be reformed only in '29, but in a way, when we think about what YEL is, this discussion usually remains way too superficial, in that we think there's some quick fix, that everyone just starts investing their money however they like, but there's no quick solution. And in a way, I think that's the cold hard truth, that it might really take that long.
YEL determines entrepreneurs' pension social security as it stands. And if we now consider how many different laws social security has to be taken into account in, it's not just a small technical entry somewhere in a corner of the law to fix YEL, but now this YEL earned income and its lousy definition at the moment, well, it determines the level of so many social security benefits, unemployment, rehabilitation support,
sickness allowance, parental allowance. So it's not just a walk in the park, as unfortunate as it is that the reform takes time, I don't believe it's realistic to truly think about reforming it much faster than that. So in a way, I was quite grateful to see that there's an absolute deadline in 2029 after all, because otherwise it could have just dragged on and on. Maybe while we're on these good highlights, you used the word investigator, referring to Jukka Rantala
I suppose, but actually it's been a bit unclear to me, this preparation responsibility was pushed a bit to this preparatory working group, but Liisa, aren't you in that group too? That's correct. Yes. So, so now you have some work to do then, or how does this thing go? Should I come there too to be heard? You can always try, I guess. Yeah. I don't think there are any restrictions set, so the investigator can probably hear whoever
they want, and you can probably suggest yourself. So investigator Jukka Rantala really has quite a big responsibility here, but he also has massive experience. So I'd believe that he's considered a very suitable man for this task. And they'll certainly try to give him peace to work now, so the task of the working group around him is perhaps rather to bring different perspectives and
then maybe to balance the work that's being done there. But it really is quite a big job for just one person, so we're turning our gaze to the investigator. Yes.
But about this working group around him. Is it people from TELA or is it the corporatocracy or how is it formed? Well, as for I was very disappointed, for example, with this Risto Murto working group. After all, not much really came out of there, especially since almost nothing was pushed through.
So, in a way, or rather, the group around here is what matters. So, well, our working groups are usually very long-winded, and something I've also criticized quite a lot regarding other laws and government proposals is that working groups tend to be these tripartite ones, meaning labor market organizations and the government are there, and this is quite old-fashioned thinking, because it leaves so many people outside of the
tripartite system, but now this working group is perhaps tripartite plus micro and sole traders, which of course I consider positive, and in a way, that it then represents a more balanced perspective, but that's how the working group is. So this probably isn't very fast fast action, and in fact, the first thing that comes to mind regarding the schedule is that we started about two years behind
to fix this YEL. This whole circus should have been started at the very start of the government term, because this problem was already known over a year before the government changed. So in that sense, I do have to give some criticism regarding the schedule. Of course, it surely takes time, but now when we think about those entrepreneurs, who have already received such an erroneous pension contribution decision from there, which is directly enforceable, this pension contribution, I would hope that now,
in addition to these other quite good outcomes from the mid-term review, there would be something like, for example, fixing this appeal process, because those who have clearly been treated unfairly, who have received, for instance, contributions based on turnover, they could somehow have their case re-evaluated by more competent people, for example, because there are so many of these cases, and they have specifically forced businesses to close, and even though legislative work always takes time, especially such a big issue. There
is also this funding question as well, which is on top of these social security issues and others. So this YEL is like a massive entity there. Liisa is completely right, but the thing is, how we can save the field of entrepreneurs, those thousands of entrepreneurs who already have that absurd fee, which isn't based on anything, so for this, some kind of well, an appeal route, a quick fix, something to get those matters
back on track, so we can wait those 29 years, if it actually takes that long. But this situation is now so acute that it's just not being understood enough at the moment, in my opinion. Yes. Well, there come to mind now a few things we've all discussed, so, uh, I mean, uh, this government, I think, quite sensibly reduced the, uh, well, tax wedge from that outrageously high 60%
level, so closer to 50%. Uh, but well, included in that is the pension contribution wedge, so in a way people don't really understand how, like, massive this roughly 25% wedge is, even in international comparison, and then it's also because it goes through the tripartite, in a way, funding mangle, and from there, via a political decision, eventually comes something based on some principle, so it's quite an opaque system. I've personally, for example, spent 13 years of my career in London, and there
in a sense, a much smaller contribution has, personally and as an employer contribution, gone into, like, my own investment fund that I can then draw income from, so it's much more transparent and credible and a nicer system. So that's why, surprisingly, I kind of like this system, even though I have YEL and from Finland too. And I might appreciate it as a sort of, like, a little bit of a tail end, if I were to live to be 95, for instance, it's nice that something comes from there. But like, I don't know if people think like
this. No one in Finland has probably even heard that they could invest it or that someone else does it differently, and whether this 25% is like high, well, this kind of discussion isn't being held in Finland at all, in my opinion. Well, I think right now you're at the very heart of the matter, that in a way we, we have this problem with YEL and that it should be reformed, and I really agree with Jokka here, that at the very least, this current situation should be frozen until, as is understandable, this drags on, I mean it can't be some
quick fix, but it has to be considered carefully, and this is like, this is one thing. But right now, I think Finns in general don't understand almost anything about the pension system. And I think this is really worrying, and it's important to have discussion and opinions, but but you should like understand the basic principles of how our pension system even works. So very, very few—even now when you said 25%, I
bet that even, even among the listeners of this podcast, who are perhaps more informed than average and more familiar with things, many are like, 'wait, what 25%? What?' or no light bulb goes off. So these need to be explained. So we really do have a statutory pension contribution of nearly 25%. It's 24.89, if I remember correctly. And what does this mean? Wage earners don't
understand a thing, because their pay slips show that about 7% goes to that statutory pension contribution, and the employer pays 18, but a salaried employee never even realizes. But in total, for this individual, a 25% statutory pension contribution is paid. An entrepreneur is solely responsible for this 25%. There's no one to share
this with. There's no employer. The entrepreneur alone pays the 25% pension contribution, which is mandatory. Well, then it naturally becomes critically important that what it's paid from. If you're forced to pay 25%, then what it's paid from is like a matter of life and death. And right now specifically this current law and its interpretation guide, it's not the pension companies' interpretation, but it's the current law. And, and its interpretation guides, which are
made by the Finnish Centre for Pensions, so in those it really is the limit that based on turnover, so if you have to pay 25% based on your turnover in pension contributions, then everyone can understand why we have these bankruptcy waves and why small businesses fail. So now we should like discuss very clearly what this statutory mandatory pension insurance contribution is paid from. And I represent the viewpoint, and micro- and
sole traders represent the viewpoint, that it should also be paid based on actual earned income. Like, the basic principle of the pension system is that pension is paid from earned income, so that's how it should be for entrepreneurs too. Even so, we're still in that mess, that the 25% is an absolutely massive fee, even if it were based on actual income, but Europe in general in this situation. Exactly, exactly. Yeah. And this whole
thing will be solved once they are at some point based on actual income for YEL. It's just senseless that currently we take for example the previous case, the massage therapist, so the fact that the therapist does maybe billing, meaning turnover, of 4 grand a month, so their real actual income might be like €1600 a month, once everything is deducted rent, chair rent, expenses, uh, cleaning, all of these, so they have to
pay based on 4 grand right now. 25 percent in YEL, even if the actual income is 1600. Mm. So this is completely brainless, this current model.
And this came at the end of the previous government in late 2022 it was probably section 112a that was added to the law, where these are then reviewed every three years and so on, so in practice with this model we will proceed until the year '29, and this massage entrepreneur example has to pay a quarter of their turnover as a YEL contribution, anyone who understands finances realizes that it's just not possible, then the company goes
under and maybe to the unemployment line and becomes a burden on society after that. Yeah, by the way, it's really interesting, one architect, Sanna Marin's, her MA-PI Oy's, well YEL contribution policy, I'll at least be watching with interest to see if Sanna Marin's YEL contribution is paid based on a million in turnover probably not, but well yeah, you can find people to blame here in the previous government, in a way we should have fought then, like
you said, for what makes sense, and then the current government should have immediately started at the beginning of their term. Good that something is being done now, but the fact that this is potentially delayed until '29 is just too much. From this so the payment for the work, based on the actual paid salary the YEL payment would be a natural thing, but a new can of worms has opened here, that we'd include capital income in it, and this is potentially a new monster topic. So there
the leftist forces, surprisingly, look at it as if all dividends are based on earned income here. So that's why I might want this main income element here, so in a way, one patch would be that it's based on just the salary and then there'd maybe be like some voluntary personal fund element for that capital income that would take it toward this kind of Anglo-Saxon
funding principle, that if that main income is also brought there, at the very least it should then be made into its own fund income block and not just taken into this system just to pay for others' expenses. That would at least be one idea, but this whole thing is easily ruined like this, if we calculate in a leftist way this total income, where absolutely everything like imaginary, realized, and dividends and earned income are added up, so
in practice, such a possibility shouldn't even exist, that dividend income and my capital in— don't underestimate the left's ability. This, this is actually, knock on wood. Well, there's... let's say that it hardly can go like that even in some leftist dreams, maybe not quite like that. I understand your need to maybe exaggerate this, but in a way, the question is now basically so that
the listeners can keep up here, meaning what is defined as earned income is now the question. So if we talk about, for example, what I've been trying to explain, that if we talk about income taxable income, then this is like a clear distinction. Why must we talk about income taxable income and not just salary is of course because not all entrepreneurs pay themselves a salary. So here we mainly mean sole traders or such
freelancers or others who don't pay a salary, they're not even in the income register. So in a way, how to evaluate this as fairly as possible for everyone, it's that income taxable income is like clear take-home pay. This is like a universally, even globally accepted idea, but of course it then opens the can of worms about what exactly is income taxable income, because a small part of capital income is taxed
as earned income. And now this is of course possible in some model. So it can probably be proposed and maybe the investigator is making these calculations, that if that small part of capital income would also be taxed as earned income, but it's still just a part and now, like, so the discussion wouldn't go totally off the rails, that now it's moving toward all capital income and dividends and such. But this is exactly
the discussion we need, we would have needed this years ago, like where the pension contribution should actually be calculated from, but wages, earned income, taxable income is clear and logical. Or then, well, a voluntarily chosen funded pension contribution. I mean, I'm extremely happy with that British funded pension. There's this thing where employers compete in a way that, well, they have a certain minimum they pay, kind of like
the employee pays a tax-deductible amount besides this payment, but then you can increase it, and I had nice employers who competed so that there was a slightly larger employer contribution there, and this system was both, in a way, in an employee company and an entrepreneur company, so I personally wish that the funded pension model would be brought alongside it at least, like in Sweden, where 10% of all occupational pension contributions
are funded into personal pensions. I would hope that this discussion would also be had around this big pension reform debate, and I would have hoped that in these 2025 tripartite pension reforms, this would have even been brought to the table. I actually sent messages there; nobody was interested. From there, the only solemn decision was that, uh, the equity weight was increased in practice, so they really dodged all these kinds of things in this, sort of,
official tripartite pension reform. Well, that's where it should have been brought up, because our challenge now is of course that we can't just give entrepreneurs some freedom. It should then be given to everyone, so that's where it stands, that we basically need to first look at the labor market side and a Swedish model like that. There's been much talk about how, if people could decide even a small part, that
they would be given the option to invest even a small part themselves, or it could be limited in some way, like choosing from different investment baskets, like they have in Sweden, but even there, it's been noticed that, in the end, people's own enthusiasm to freely choose a more investable pension fund is quite low. And then another interesting observation is
exactly that, in a way, the investment basket created by the state has still been the best of them, so it's a bit, on the other hand, I do support the idea that everyone should get to invest even a small part themselves or at least have some freedom to choose where they can to invest, because it would increase our investment expertise and understanding, which is extremely weak among Finns. In a way, from this kind of societal
perspective, I think it would make sense for people to have more a bit like ownership and more understanding of it, because if something now for example happened and we were able to, by some miracle overnight, free up completely, let's say, that suddenly starting tomorrow everyone could invest exactly how they want. everything would be freely investable, then nobody would know how. I mean, it would be a total catastrophe. People would lose all pension money and given how many of those online scammers we have even now and
others, everyone would be scammed. Everyone would be taken for a ride and then like funds fail and that money would be invested randomly. It doesn't work. So in a way we can be terribly critical of the current system, but but it's watertight. It's like it's expensive, but watertight. It's safe, so people don't— but people don't develop their own kind of understanding of how they could even invest or what the options
could be. Yeah, those are some good points, but I talked with my college friend Katherine Rili, who in the US gives pension fund advice and in a way participates in all kinds of working groups there, so she said that Americans really just understand incredibly well about investing and in a way, when you have some portfolio, how you kind of make a sort of glide path where you start generating income from it. She said that even the British, who basically have the same system as
the US and 401k, they have a much more passive system in a way.
I mean, in a way people didn't really for some reason learn to be like active investors. But I'll bring myself up here as an example, so I've also done those like I originally invested everything myself, uh, I made quite good returns and surely beat the Finnish pension system even back then. So even though Liisa is right that this, like, produces a guaranteed kind of 4 percent return, it's really not a good return. So, like, even during my messing around phase, I made much
better returns than the Finnish system. Then I consolidated it and in a way allocated it so it makes even better results. It is like completely possible, at least reasonably— okay, I'm an investment banker and a finance professional, so it doesn't quite go like that, that everyone would just like put their money into some Ponzi schemes or housing scams, and of course people need to be protected from that, but the Finnish pension system doesn't, in my opinion, produce very good returns. There
Liisa had a strong point about how this people's capitalism would be really important to teach to Finns, because we— well, Finns don't invest and and one option in this YEL system, too, could be that as much as it's paid once we get that kind of minimum there, the national pension style guarantee pension there, and after that the entrepreneur can decide for themselves what to do, whether to invest, if they want more money, or something else. But one of the main problems is, in my opinion, specifically that
the Finnish pension system doesn't generate enough. Well, we can always look at whether those instruments are the right ones or not, but once we get from TyEL to YEL, we get to that absolutely horrific problem and mistake made in the early 70s, because they didn't start funding YEL. TyEL is funded. The compound interest effect is massive. It grows constantly there, but YEL has been going since the beginning, since the 70s, in through one door and out the other. Now when I pay 1000 euros in YEL today,
it's already in someone's account tomorrow. It doesn't stay anywhere to grow, so there aren't any instruments there that would affect its growth.
So here is one thing, as stated earlier, this YEL is a large entity, so this is how it will be paid in the future, because it can't be that current entrepreneurs pay for the pensions of those entrepreneurs retiring now, because well, it's not exactly their fault. It's not a mistake made by them, but rather a collective mistake of the time. So this must be solved somehow, how we can make YEL funded. Is it
then some loan model, where the state gives a low interest loan, paid back gradually or what the system is. But as Liisa stated earlier, we need a sustainable solution for this that lasts for decades, so this kind of quick fix isn't enough. Mm. But the problem with funding is the biggest problem, even though we usually more easily end up arguing about that pensionable income, because that's obviously what entrepreneurs experience in their daily lives all the time, but in the end I'm
personally much more worried about that funding problem. Well, why was it not funded originally in the 70s? Well, they thought the state was like the world's best guarantor. So they didn't really anticipate the situation we are in. The population is aging at this rate and pension contribution percentages just keep rising, while the state basically signed its name on the paper and said well, if something happens, we'll guarantee this deficit
and they didn't think that funding would be any problem. And then at the point when it started being a problem and the deficit started coming, then nobody bothered or knew how to take action anymore and it has just been swept under the rug and they didn't dare to intervene. There hasn't been any daring or even really any attempt. There hasn't even been an attempt made, and now the situation is effectively that it's 500 million in deficit every year, every single year. The situation is unsustainable and maybe
we wouldn't need to be so worried if the state's economy was really good, but since it's not. Which, of course, makes it quite a justified concern for some younger people, that we think, well, how far will the state guarantee these pensions. Could it be that they're no longer guaranteed? The chance is very small.
We must remember that pensions and property rights are protected by the constitution.
So, it's unlikely that it would ever happen that we'd be left with nothing. But it is unsustainable. So funding must definitely be reconsidered. And also from the perspective that if one day we want to combine YEL and TyEL, returning to Sami's very first comment about how he feels it's useless to pay any YEL when he already pays so much on the TyEL side. Exactly. But we cannot
combine YEL and TyEL until that YEL deficit has somehow been caught up. And we'll probably need 30 years for that, but in pensions, that's a short time, and only through funding can we achieve it. Or then, make radical decisions. I don't really see it that way. In my opinion, it's this illusion of collectivism, that somehow all past, future, and current entrepreneurs are a collective that is somehow
responsible for each other, and then there are the employees who, through those real companies, form another collective together, and these should never mix. And this is a crazy idea because we are people with multiple roles, even more so in the future, jumping between TyEL and YEL and back, and in a way, I think the most logical thing would be right now, while the situation isn't too bad—500 million is a lot, but
in this whole mess it's quite little—we should just merge them and create a collective system, and then from that 270 billion pot, noble-mindedly throw, say, 7 billion into this YEL computationally and say that from now on, they are together; that would be the most logical system in my opinion.
Well, it would be, but you'd never get employees to agree to that. Because, let's start the discussion there. I think this discussion should have been held. Well, it's started now. Yes, it has. But specifically because of this—and I've been quite critical of this—these discussions are first of all held in separate bubbles, meaning TyEL is reformed behind closed doors in private cabinets, and then YEL here in its own bubble, and that too is somehow obscurely
reformed, and nobody really knows what's happening there, so why is that? One reason why citizens, whether employees or entrepreneurs, have great distrust in this pension system is that they don't understand anything about it, and for that, pension companies, the state, and labor market organizations have only themselves to blame.
bearing responsibility, that these decisions are made behind closed doors.
And it was quite striking, in my opinion, that even now when there were these, like, pension system reforms, then they come out like, specifically from behind those closed doors, peeking out into the public, like, 'Hey, we've made some really good decisions' and then even, like, on some social media, 'Well, when I was there at the decision-making tables doing it,' why on earth, because these pensions concern all of us, so we must involve people much more in this conversation, if we
want there to be trust in that system, because we can always be, like, suspicious about what the return is, but then we are like, really in a pinch when people no longer trust at all that they even get their money from the system. It starts to, like, erode this, like, the cornerstone of the welfare state is wobbling a bit. Now we're at the core of it. In practice, the functioning of society is always based on trust, on the fact that things get done. Liisa mentioned that trust
a couple of times just now and now we are specifically, like, for example, young people have been asked, 'Well, do you plan on getting pension money,' then more and more say that the trust in their own future pension has been kind of on the decline in recent years, according to research. So this then means that, okay, the effect could be good in the sense that if they then think, 'I'll start investing myself,' then that's positive, but if it erodes trust in this whole system, then
no one really wins. And the fact that, for example, this YEL thing is a bit hard to grasp on social media, when you make various posts about this, there's always some smart-alecks who come there like, 'Well, what about under-insuring, well, what about 500 million.' But this question isn't related to under-insuring or 500 million, for example, it's that this hasn't been
explained to people clearly enough, in my opinion, what it's about. Not everyone watches this episode, even though all 5.5 million should watch this episode so they would understand what it's about. But in practice, there are also over-insurers in Finland. The Pension Security Center studied in 2020: 59% under-insured and 25% over-insured. But no one in the public debate mentions YEL over-insuring. It's not even used as an
argument. So they kind of cancel each other out. And now the focus should be on telling people what it's really about, what we're talking about here, and then that we genuinely need to make those changes now so this would be fair, so entrepreneurs would pay YEL fees based on their real income and not imaginary ones.
Yeah, Olli, as you answer, well, so really, my father, in Aamulehti journalist Oivo Miettinen paid pension contributions his whole career and then when he was 64 and a half. So this was like, in a way, well, the British fund system, I think I might have even received some unearned value appreciation from the pension fund side, but in a way, Oiva did a man's job and died with his boots on, so to speak, so that for the taxpayer there was no net benefit at all. All of his
contributions were distributed to others. But Liisa, you had a point about this. Yeah, that's just generally quite absurd, what Jokke just referred to, when people don't understand over-insuring and under-insuring. There is no such thing, really. They are completely artificial terms, that under-insuring and over-insuring. I mean, relative to what? Someone just came up with some artificial reference figure, like, well, you're now compared to the average
employee's median salary, seasoned with a bit of your turnover. It might as well be compared to a zodiac sign, because it's just a kind of benchmark where they say, well, you're now compared to the average employee in this field and this turnover. And in relation to that you under-insure or in relation to that you over-insure. So these are weird concepts. If everyone just paid based on their earned income, then
of course there wouldn't be under-insuring or over-insuring, but it would be exactly from those earned incomes. Then it would be right. Yeah. My first boss Timo Löyttyniemi has long been the CEO of the State Pension Fund, a former investment banker, a smart man, and a successful pension reformer, and VER started off back then so that, if I recall, it was given a five billion gift capital which has now risen to about 25 billion with
good investment returns, but then along the way they did a bit of stuff like moving Posti and other state-owned companies there and with political decisions, and to return to this TyEL and YEL reform, it feels terribly difficult, but this kind of work has already been done at VER on a similar level and quite successfully, and no one complains about it. So this just needs to be done now, like, uh, then in a way these calculated figures might seem awful, but let's
not play identity politics. So, uh, I can't understand how, for example, on the left they say that entrepreneurs are somehow collectively always eternally responsible for the previous generations and the next ones. It's like a crazy idea even. So let's just make one universal system now, and then perhaps this point Liisa made at the start, the point of this episode, that this is also social security, that's being completely forgotten. So this is
like a total minefield for entrepreneurs, so good luck trying to get some kind of social security from there during your career. I tried Anyway, just for fun, since I had that first year of YEL, well...
Um, just for fun in a way, when I once again became...
a father, I took one month's worth of this paternity allowance from YEL, and I think it was 50 euros. It looks glorious there...
on my pension record, in a way, that 50-euro paternity benefit, but...
it just goes to show how bleak entrepreneurs' social security...
actually is, in a way. But then again, I want to touch...
upon the point that both of you have now mentioned, that why...
are entrepreneurs responsible for paying the pensions of retirees, but...
that's how it is for everyone. It doesn't differ between employees...
and entrepreneurs. We have a generational bond, we have this chain...
in place. Whether we like it or not. And in a way, it's actually ingenious, because its purpose is specifically to ensure that no single...
government could decide to completely scrap this pension system and just snatch everyone's pension money for their own use. This can't...
happen. No government can make a decision that we'll just...
stop paying pensions now and take this pension money for our use, because the voters would never agree to that. So there's...
kind of a built-in safeguard that those of us who are currently working, whether as employees or entrepreneurs, we pay for the pensions of retirees.
It is truly a kind of protection...
against political fluctuations, and it is practically...
impossible to break. If someone wanted to break it and we...
wanted to get rid of this generational bond, it would have to be done...
very slowly, by gradually shifting it. Little by little, starting to...
open up the system, because no one can do it all at once, unless they are combined, say, with TyEL. I think it could be done. They...
can be merged, yes, but it requires that somehow, after all, the deficit that is there, which the state has to pay, must be...
covered somehow, and okay, now we've seen a good example of how...
the government found a way to take from the State Pension Fund, as you noted, from those funds. Well, they took a billion, couldn't they...
borrow a bit more? During good times, money has been put there...
specifically so it can be taken out occasionally. Yes. These are very important...
discussions, and we do have options for where we can...
take it from. Or if the law is changed, as Jukka just said, there's no...
reason why the state couldn't lend directly, with a long loan term...
also into the funding. That would be a very relevant option. Yes. As long as...
it generates a positive return. So the investment manager needs to be smart.
In itself, I'm actually wary of this, in a way, as we've appreciated here...
these pension insurance actuaries and investors, but they aren't really any geniuses, like, any normal finance person gets the same returns. So in a way, that's why they wouldn't want to mystify the ability of the Finnish system to generate amazing 4% returns. It's just not that impressive. Similarly, I think Solidium is a complete waste of money. It constantly underperforms for everyone, so this kind of state
machinery investing on our behalf. Okay, it protects the complete idiots who don't understand anything about investing, but the average investor actually does quite well with the pension system. But we have that social security there, so if we haven't talked much about it, as you said yourself, with social security, no one can know the number of their days. So we can't know how long we'll be retired, how long we'll receive a pension. We don't know if we'll face
disability, if we'll need rehabilitation support. So this system is social insurance and it covers all of this, so it could be that I'm the world's best investor, but I become disabled in my thirties. Or someone scams me out of my pension money, or Trump or someone else goes wild, causing a global crisis in the markets. You can't know, but if a meteorite doesn't hit Finland, our pension system is safe. This is what I'd like to
tell young people too. It is expensive, but it is safe, so no one needs to worry about not getting their pension. And this actually leads us to the point that if an entrepreneur, imagine a model where an entrepreneur only pays the YEL minimum, meaning they've paid their minimum share for the guarantee pension, the national pension, that amount, but would invest the rest
themselves, then if they pass away at 35, 55, or 65, then maybe those self-invested funds could go to their heirs, but when you sort of invest that money into YEL, it never comes back. Yeah, in this minimum thing, I think it's as tempting as it sounds, paying up to a certain minimum limit, but we just can't define what that minimum limit should be.
People often forget that if we think about, say, the current guarantee pension limit, it's 980 a month. If we imagine being retired for 20 years on average and wanting at least a grand a month in pension, what's that minimum limit? We'd have to save 250,000 during our lives just to get that grand with
a small interest. If I want a two-grand pension, which is also modest, I'd have to save 500,000 during my life. Not many people start to be able to do this, that they would sort of independently know how and be able to save with a reasonable interest rate and through funds or investments like half a million during their lifetime. These sums are however very large, so in a way, what the limit is, what the average minimum limit is, so if
someone lives longer to 90, someone else dies at 70, another is on disability pension, another isn't. If we were to define some kind of minimum limit up to which everyone pays and after that it would be freely investable, that minimum limit would already be so damn expensive that I don't think anyone could. Several hundred euros a month. Though it is an actuarial problem. I mean, people in the States do solve this by being able to like sell your fund against an actuarially calculated
life expectancy, so the actuary calculates that you, Liisa, will live to be 73. If you live longer, well, there are so many others dying younger that it's worth selling this cash flow to you at this price. So that's how it's sort of solved out there in the big world and it's not really that big of a problem. Then a lot of people die with their boots on with a large fund, but then like Jokke said, it's inherited forward, so even that isn't gone from the system. In Sweden, this problem, they
call it like a hygiene limit, this sort of start-up. So so, so in a way, we should strive for this more in Finland in my opinion, that everyone should take it as a common goal to clear the national pension from the system so that they don't burden the taxpayers from the state budget. But this discussion isn't being held at all. People have no idea where the money comes from and what. So like with the YEL too, that it
comes like 500 million from the budget, from current tax funds, so it's not discussed anywhere. Well yeah, I would see that the fund should be slipped in so that exactly 10% of the total payment would be what the process is started with on the TyEL side too, and then I think these should be merged now, while the gap doesn't grow too bad, so my solution is to merge TyEL and YEL and bring that 10%
to the funded pension and do this... I don't know if this investigator's group is the one that could make such a grand decision, if it's so that it should come this autumn in November. This year there should already be black on white. Yeah, it should come in November. Yeah, I...
will you give me like what percentage for this package of mine? A slice. I I think that right now there will probably just be different models for how the work income can decrease again and what those models could be based on earned income. I hope there will be something referring to the funding, if there's just enough time, because that would be really, really important, but still, basically where this
conversation started and what Jokka brought up well, that entrepreneurs have a massive distress, so it's more critical to resolve the work income from which it's calculated, but in a way nothing helps if the funding isn't resolved too. Yeah, good point. To finish off, Liisa, tell us a bit about how your association's activities started and is it a growth business? It's started incredibly well, since we're an organization, so we don't
need to think about business in that sense, but it's really staggering; let's say I knew less than three years ago when I founded this organization that this would probably work and there's a need for it, but it's been astonishing how great, we already have thousands of members and every single day applications come in; the need is huge. The YEL reform is of course one of our core
issues that we push for very strongly, but there are others. So there are so many issues where solo and micro-entrepreneurs have been marginalized for decades, so a voice is needed in really many matters. I must take my hat off to Myry, just amazing work. I met Liisa for the first time at SuomiAreena last year regarding YEL matters. We were speaking then, and since
then I've followed more closely and now I keep seeing Myry in the field.
Mm. Many micro and solo entrepreneurs have joined and now the rest should join too, as it's extremely good work and specifically the practicality; having followed Myry's activities from the side, there are sensible, concrete solutions and statements constantly.
And like Liisa mentioned earlier, they help hundreds of entrepreneurs on the phone all the time, maybe even thousands, so you're doing important work and I appreciate it. Thanks. It's always maybe a bit awkward to blow one's own trumpet, but we really have helped thousands of entrepreneurs, it's important and in a way it's about balancing this conversation. Maybe I'll quickly refer to the tripartite system and this, the world is changing in many ways and
we need broader thinking and bold discussion. Because if we are always so careful about sparking discussion, no reforms will happen. More discussion like this and since SuomiAreena was mentioned, a great summer talk I had with Ivan Puopolo who does these gigs wondered why I wasn't coming there, so if there was maybe some stage invitation for this group,
let's go and talk about this topic some more, so you can suggest SuomiAreena, if there are still those panelist spots open. I've kind of missed out on this Pori experience like entirely at this point. Ooh-la-la. Was it a great summery Pori. Ah, the sun sets with a pina colada in hand, and it's always, yeah, it really is totally awesome on social media. Yeah, I've been to Pori Jazz for sure, but
well, not there yet, so maybe maybe there's still a chance. uh, thank you for this, uh, Jocka Träskbäck and Liisa Hanén, and I suggest that, well, once again I mean, Liisa, I looked at your career a bit, and you have this kind of media background, so let's have a short discussion about the change in the media field and, in a way, since we've all done something there, like running Stara, let's have a small inner-circle talk about this
does this work? yeah, it works. alright, thanks for the visit, and since you've watched or listened this far, please subscribe to the channel, and leave a comment on how this entrepreneur pension system should be solved.