Social security agreement between Australia and Finland
A social security agreement with Finland was signed in Helsinki on 10 September 2008. The purpose of this paper is to let the community know what social security agreements do, and how this Agreement in particular will affect people.
The views of the Australian community and expatriate Australians, particularly those who are most likely to benefit from the Agreement, are an important part of the Agreement process.
When will the new Agreement start?
The Agreement is expected to begin operating in July 2009, after the necessary treaty, legislative and administrative processes are completed in both countries.What benefits will be covered under the Agreement?
The Agreement covers Australian and Finnish age pensions. The Finnish age pensions fall under the National Pension Scheme or the Earnings-related Pension Scheme. In addition, the Agreement covers Finnish Earnings-related disability and survivors´ pensions.Why do we have Social Security Agreement?
The proposed Social Security Agreement between Australia and Finland coordinates the two countries' social security schemes to provide better retirement income coverage for people who have moved between the two countries.People who have lived in more than one country often find that, when they claim a pension, they do not have enough residence or contributions under a social security scheme to qualify for payment or have insufficient support.
To help overcome this problem, a network of social security agreements has been set up within the international community.
One of the key elements in these agreements is that the partner countries broadly share the responsibility for social security coverage and related costs. If a person has lived and worked in more than one country, then it is fair that those countries share the responsibility for supporting that person when he/she claims a pension.
Agreements help many people to receive a part pension from one or both countries, which they would not otherwise get. It is an important principle that Agreements do not take away existing entitlements.
The proposed Agreement with Finland is similar to the agreements Australia already has with Austria, Belgium, Canada, Chile, Croatia, Cyprus, Denmark, Germany, Ireland, Italy, Malta, The Netherlands, New Zealand, Norway, Portugal, Slovenia, Spain, Switzerland and the USA. New Agreements have also been signed with Greece, Japan and Korea but are not yet in force.
What will Australia do under the Agreement?
To qualify for an Australian age pension people normally have to be Australian residents and in Australia on the day a claim for pension is lodged, and they usually must also have at least 10 years Australian residence.The Agreement modifies these rules so that:
- Australia will treat someone who is resident in Finland as being a resident of Australia and present in Australia, so that the person can lodge a claim for Australian pension;
- Australia will add the person's periods of insurance in Finland to his or her Australian residence so that the person can meet the minimum residence qualifications to get an Australian age pension;
- Australia guarantees to pay age pension indefinitely in Finland, as long as the person otherwise remains entitled.
What will Finland do under the Agreement?
Finland guarantees to pay its National Pension into Australia indefinitely. Generally, without the use of an Agreement, the Finnish National Pension is payable outside Finland for only one year. To qualify for a Finnish National Pension people have to be resident in Finland and have at least three years of residence in Finland. Under the Agreement, Finnish nationals and Australian citizens resident in Australia can also claim and be granted the National Pension. In addition, under the Agreement the payment of the National Pension may continue when a pensioner moves from Finland to Australia for longer than one year.Finland also guarantees to pay its Earnings-related pension indefinitely into Australia. At the moment the payment of such Finnish pensions to people resident in Australia is based on the national legislation.
In the Earnings-related Pension Scheme there are minimum qualifying periods required for the entitlement of part time pension and unemployment pension. Under the Agreement, people will be able to add their periods of employment in Australia to their periods of employment in Finland in order to qualify for such pensions.
How are pensions calculated under the Agreement?
Australian pensionsPeople who live in Australia but do not have ten years' residence in Australia can count their Finnish periods of insurance to qualify for an Australian pension, subject to the means test. During this time (until they have ten years residence in Australia) they will be paid the normal income-tested pension rate less the amount of any Finnish pension - ie, the Finnish pension would be 'topped-up' to the rate of Australian pension they would receive if they had no Finnish pension.
Australian pensions in Finland will be based on the person's period of 'Australian Working Life Residence' [this is the period between age 16 and Age Pension age]. A full pension, subject to the means test, is payable to a person with 25 years 'Australian Working Life Residence'. For example, under the Agreement, a man who has lived in Australia from age 30 to age 50 (ie 20 years) may, at age 65, be paid 20/25ths of a means-tested Australian age pension in Finland. No pension is paid overseas if a person has less than 12 months Australian Working Life Residence.
Finnish pensions
Finnish pensions are based on periods of employment for Earning-related pensions or residence for National Pension the person has completed in Finland.
Under Finnish legislation, Finnish National Pension will be calculated on the basis of the length of residence in Finland between the age of 16 and 65.
Finnish Earnings-related pensions are also calculated according to Finnish national legislation however, when the Agreement is applied, periods of employment completed in Australia can also be taken into account.
Administration and lodgement of claims
The Agreement will create administrative links between the social security systems of Australia and Finland which will help pensioners in one country in their dealings with the social security authorities of the other.Centrelink will assist people in Australia with claims for Finnish and Australian age pensions, Finnish Earnings-related disability and survivors´ pensions and the Finnish authorities will assist people in Finland with claims for Australian and Finnish age pensions.