Early retirement pension

What it means

An early retirement pension is a pension insurance benefit that can be drawn before reaching pension age, at the earliest two years before it. It is meant for people who no longer want to or cannot work but still have time left until the regular old-age pension. It is paid by the Social Insurance Agency on application.

Entitlement arises if the applicant has the required number of years of pension insurance and the calculated pension exceeds a statutory threshold linked to the subsistence minimum. The second key condition is that while drawing the early pension the person must not be pension-insured, for example through employment.

The amount is permanently reduced for each period by which the person retires early. The reduction does not disappear on reaching regular pension age, although the pension is recalculated then. The rules have changed in recent years, so always work from the current wording of the Social Insurance Act.

How it works in practice

Before applying we recommend checking the insurance record with the Social Insurance Agency and filling in any missing periods. On request the agency calculates an indicative amount, so the person can compare how much the reduction costs and whether early retirement makes financial sense.

For an employer it matters that an employee on an early pension cannot at the same time work under an employment contract. If the company wants to keep working with them, it must choose between ending the employment and another form of cooperation, checking whether it gives rise to pension insurance. The wrong approach can lead to the pension being suspended.

On reaching pension age, the early pension becomes an ordinary old-age pension and the work restrictions fall away. The person can then work alongside the pension without losing it, like other old-age pensioners. The rules on employing pensioners, including contributions, then follow the usual conditions.

What to watch out for

The most common mistake is that an early pensioner starts working, for example under an agreement or a short-term employment contract, without knowing that this triggers pension insurance. The Social Insurance Agency then stops payment or asks for amounts paid to be returned. Check the consequences before taking up any paid activity.

The decision on early retirement is long-term. The reduction applies for the whole time the pension is drawn, often decades. When comparing options it is worth considering savings in the second pillar, other savings and health, not just the current job market situation.