Personnel Funds on the Rise in Finland: Tax Advantages and Engagement Benefits Boost Popularity
The popularity of personnel funds in Finland has been on the rise in recent years, coinciding with two changes in the law. These changes have allowed more wage earners to benefit from the tax advantages of these funds. According to recent data, there were 381 personnel funds in Finland at the end of last year, an increase of nearly 120 from two years earlier. These funds had over 178,000 members and nearly 890 million euros in assets.
The system, which was established 35 years ago, has gained traction recently as more employees seek to take advantage of its many benefits. One such benefit is that employees can invest their performance bonuses in the fund tax-free, with taxes paid only when funds are withdrawn. This allows individuals to delay tax payments and increase their long-term savings while also engaging employees and improving productivity.
Another important aspect of personnel funds is that they offer a way for employees to save and engage with their company while enjoying tax benefits. In fact, the largest personnel fund in terms of capital is OP Financial Group’s with approximately 118 million euros, and Posti Group’s in terms of membership with over 25,000 members.
Last year, the Personnel Fund Act was amended to allow employees of smaller companies to establish a personnel fund, with the goal of strengthening domestic ownership of businesses. Additionally, legislation regarding labor investment dividends now requires social insurance contributions, resulting in higher costs for employers and employees alike. Despite these changes, compliance with the Personnel Fund Act has prevented misuse of the system for tax planning purposes.
Overall, personnel funds offer a sensible way for employees to save and engage with their company while enjoying tax benefits. With the growth in the number of funds and changes in legislation, these funds continue to be a valuable investment and savings option for wage earners in Finland.
