Pension Report: Number of people joining the third pillar is growing steadily

TALLINN - According to Tõnu Lillelaid, an advisor at the Ministry of Finance's Financial Services Policy Department, 2025 was a relatively "boring" year for the pension system, with no significant major changes occurring.

"This is not necessarily a bad thing - the calm and long-term accumulation of pension rights and funds is the very essence of a pension system," Lillelaid wrote on the Ministry of Finance blog.

The number of people joining the third pillar has been growing for the sixth consecutive year, with pension funds driving this growth. The number of second-pillar savers is influenced by those who withdraw their money before retirement age, although their numbers are clearly decreasing - 16,300 people in 2025 compared to 18,200 in 2024.

The volume of assets in both pillars is growing. In addition to contributions, this growth is also influenced by positive returns. For example, in the second pillar, out of 6.8 billion euros in assets, 3.1 billion comes from returns and 3.7 billion from people's contributions.

"2025 was a more challenging year for financial markets than 2024, which resulted in lower returns. However, long-term real returns in both pillars remain positive. The higher returns in the second pillar were influenced by the better performance of its actively managed funds. We should recall that in 2024, the performance of Estonian pension funds was the best among OECD countries. By summer, we will see how our funds' 2025 results rank internationally," Lillelaid noted.

Fees in both pillars continue a downward trend. In the second pillar, the management fee has dropped threefold over the past ten years. In the third pillar, ongoing charges are lower on average due to the larger share of index funds.

The share of assets with equity risk has significantly increased in both pillars over the last seven years. As recently as 2018, this share was only 34 percent in the second pillar. According to Lillelaid, this is due to both the removal of legal restrictions in 2019 and the willingness of fund managers to take on higher risk.

In the second pillar, Swedbank's funds hold the largest market share. In the third pillar, Tuleva and Swedbank have an equal market share - together, they manage over two-thirds of the assets.

The pension report was compiled based on data from the Social Insurance Board and the Pension Center.