Taxation of pensions and financial planning

When you are planning to retire, you should also anticipate and plan your own finances. Your income will most likely decrease when you retire, but your expenses may remain the same.

While planning retirement, you should estimate the amount of your future pension, as well as consider your current expenses and whether it will be possible to reduce them if necessary.

Things you should consider include:

• Whether it would be possible to put some of your wages aside for the future before retirement
• Whether you could repay your loans before retirement to avoid the need to pay them out of your pension income
• How the fact that you no longer have access to occupational health care will affect your finances and life
• Whether you could lower your housing costs

Tips for reviewing your finances and saving and preparing for retirement:

• Care-free retirement - Martat.fi (in Finnish)Opens in a new window.
• Managing personal finances - Martat.fiOpens in a new window.
• Finances - Vanheneminen.fi (in Finnish)Opens in a new window.

A pension is taxable earned income. However, the taxation of pensions differs somewhat from the taxation of wages. For example, you will have to pay a different social insurance contribution for wages than for a pension. In addition to tax, a pension and unemployment insurance contribution is separately deducted from wages. You may also be eligible for different tax deductions from wages and a pension. For these reasons, the tax rate on a pension is usually higher than that on wages of the same amount.

Examples of tax rates on pensions - Vero.fiOpens in a new window.