Estonian PM: No ultimatums given within govt coalition re pension reform

  • 2019-08-15
  • BNS/TBT Staff

TALLINN - Estonian Prime Minister Juri Ratas said at the government press conference on Thursday that the three parties making up the ruling coalition have not presented any ultimatums to one another in relation to the planned second pillar fund reform and the extraordinary pension hike.

Ratas said that the government has been working hard and held a number of meetings on the pension reform this week, and expressed hope that meaningful deliberations will continue in the parliament.

The prime minister underlined that the purpose of the reform is to help pensioners get out of relative poverty.

The second pillar reform concerns some 700,000 people in Estonia.

Making second pillar funds voluntary has been included as an objective in the government's coalition agreement. The initial plan for the reform is to retain the second pillar; however, people would have the opportunity to exit the fund, should they choose to do so. 

People who have joined the second pillar of the pension system pay 2 percent of their wage into a pension fund of their own choice. The state meanwhile channels additionally a portion of 4 percentage points of the social tax paid on the person into the person's personal account with the pension fund. When people leave the second pillar, the amount of money available to the state for the financing of pensions for current pensioners will grow.  

Those who choose to continue accumulating money in the second pillar fund will have the right to submit an application based on which the payments made into the second pillar will subsequently made directly into the person's investment account instead.

Pursuant to the government's plan, the owner of a second pillar fund will be able to have their accumulated assets transferred into an investment account. Transfers from second pillar funds into investment accounts will be made within two years from the application, the deadlines for which will be the same as those set for changing funds.

Withdrawing funds from investment accounts will be possible at any time. The funds paid out will be subject to income tax.