Recently, there have been two significant changes in the law that have coincided with the growing popularity of personnel funds in Finland. The number of personnel funds has been steadily increasing, with 381 funds in the country at the end of last year, a whopping 120 more than just two years ago. These funds had over 178,000 members and nearly 890 million euros in assets.
The system, established 35 years ago, has gained traction recently as more wage earners seek to take advantage of the tax advantages provided by personnel funds. 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is that employees can invest their performance bonuses in the fund tax-free, with taxes paid only when funds are withdrawn.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 system allows individuals to delay tax payments and increase their long-term savings while engaging employees and improving productivity.
Notably, the largest personnel fund in terms of capital is OP Financial Group’s with approximately 118 million euros, while Posti Group holds the top spot for membership with over 25,000 members. However, last year saw changes to legislation that allowed employees of smaller companies to establish a personnel fund. The amendment aimed to strengthen domestic ownership of businesses and enabled employees to transfer their fund membership when changing jobs, reducing administrative burden and tax implications. Additionally, new legislation regarding labor investment dividends required social insurance contributions, resulting in higher costs for employers. Despite these changes, compliance with the Personnel Fund Act has prevented any misuse of the system for tax planning purposes.
In conclusion, personnel funds offer an excellent way for employees to save and engage with their company while enjoying tax benefits. With an increase in the number of funds and legislative changes aimed at promoting domestic ownership of businesses and protecting against abuse for tax planning purposes, these funds continue to be a valuable investment and savings option for wage earners in Finland.
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