The government approved amendments to the second pillar of the funded pension scheme on Thursday, which will allow savers to access their funds before retirement age.
"Our goal is to improve the Estonian people's choice and flexibility in retirement savings. Young people are no longer required to join a fund immediately but can do so later. Those who are satisfied with the fund they choose can continue with it," said Finance Minister Martin Helme. "It's important to think carefully about your protein so that when you reach retirement age, your pension isn't lower than expected."
People who want to continue saving in the second pillar can do so. To leave the second pillar a person will have to submit an application to their bank. Savings can be kept in the fund or taken out, spent, or invested.
The money collected in the pension pillar must be withdrawn in full, and partial withdrawal of money is not allowed. Amounts of up to €10,000 are disbursed in one instalment, with larger amounts disbursed in two or three instalments. The payout is subject to income tax.
Those who leave the second pillar will have the opportunity to rejoin after ten years. Newcomers can withdraw money and leave the pillar once more after a ten-year accumulation period. Such people would only receive a pension in the future from the first or third pillars.
Most of the changes are currently scheduled to take effect in Jan. 2021, but applications for joining or leaving the second pillar will begin to apply after the changes enter into force next summer.
Both the Bank of Estonia and the International Monetary Fund have been critical of the new changes. LHV and SEB banks have said it will make investment funds in Estonia less competitive.
Editor: Helen Wright