The board of the Estonian parliament on Thursday admitted into handling a set of legislative amendments aimed at making voluntary the system of mandatory contributions by working age people into a pension fund, dubbed as second pillar of the pension system.
The board admitted into legislative proceedings a government-initiated bill of amendments to the Funded Pensions Act and, in connection with this, to other laws, Riigikogu spokespeople said.
The bill seeks to make mandatory funded pension voluntary. The letter of explanation accompanying the bill notes that making the second pension pillar voluntary will increase people's freedom and improve awareness of the pension system. Additionally, investment opportunities will expand and competition will increase, resulting in fund managers having to make more of an effort to maintain customers. It is presumed to bring along better pension fund yield, which, in turn, will ensure a bigger pension in the future.
The bill will make amendments to the regulation of the second pension pillar with which pension collectors will be given additional choices. The more important amendments to be carried out with the bill are the following - people will have the right to decide whether or not to collect pension money in the second pillar, both those who will have already joined the second pillar by the time the amendments enter into force and those who have not yet done so; in addition to collecting money in pension funds, once the changes take effect, people can also collect money through a pension investment account; people will have the right to mobilize the funds in the second pillar already at the time of collecting the pension under certain conditions; as people reach retirement age, it is up to each individual to decide how to use the money collected.
Most of the amendments to be introduced by the bill will be implemented in 2021. This will require the development of several IT systems supporting the functioning of the second pillar and the carrying out of other preparations in 2020.
As the handling of the bill was planned as urgent procedure, no drafting intention was drawn up on the basis of the Rules for Good Legislative Practice and Legislative Drafting. The finance committee of the Riigikogu was appointed as the leading committee.
Editor: Marcus Turovski