More and more people are turning to personnel funds in search of tax benefits. These funds have become increasingly popular in recent years, with the number of personnel funds in Finland increasing by 120 in two years to a total of 381 at the end of last year. These funds had over 178,000 members and almost EUR 890 million in assets, showing a significant increase compared to previous years.
Personnel funds were established 35 years ago as a way for employees to save for the long term while also engaging them in their work and boosting productivity. One of the biggest advantages of these funds is that employees can invest their performance bonuses tax-free, with taxes only being paid when funds are withdrawn. This system allows individuals to delay tax payments rather than evade or convert income into capital gains.
The largest personnel fund in terms of capital is OP Financial Group’s with around EUR 118 million in assets, while Posti Group’s personnel fund has over 25,000 members. On average, the SC Fund has the most capital per member, nearly 193,000 euros. Recently, personnel funds have adopted unique names like To The Moon Fund and Säästölokero which are unrelated to the employer they represent.
Legislative changes have played a role in the rise of personnel funds. Amendments to the Personnel Fund Act now allow employees of smaller companies to establish their own funds, making it more accessible for smaller businesses to participate. Additionally, employees can transfer their personnel fund membership when changing jobs as long as the new employer also has a personnel fund in place.
In addition, changes in labor investment dividend legislation in 2021 led to additional costs for companies as social insurance contributions must now be paid on these dividends. Despite these changes, there have been no reported cases of misuse of the personnel fund system according to law. The system continues to be a legitimate way for wage earners to save
