Riigikogu committee backs allowing lump sum second pillar withdrawals

Chairman of the Finance Committee of the Riigikogu Aivar Kokk (foreground). Source: Siim Lõvi/ERR

The Finance Committee of the Riigikogu on Tuesday supported the introduction of five changes to the pension reform bill, which include allowing the withdrawal of all second pillar pension savings at once, in a lump sum, as well as exempting the payout from being counted against an individual's basic tax exemption.

"All proposals to amend the bill have been voted on in the committee, and the committee made five good proposals which were supported by the majority and which could be included in the bill," Finance Committee chairman Aivar Kokk (Isamaa) told BNS.

Under one of the proposals endorsed by the committee, the period of advance notice for leaving a mandatory pension plan would be extended from the one month currently included in the bill to five months.

"The borrowing limit for funds will be increased from the current 10 percent to 25 percent," Kokk explained. "On one hand, in order for it not to be necessary to engage in express selloff should there be people exiting the funds. On the other as well, when lending to business owners becomes necessary to stimulate the economy, for it to be possible for pension funds to take cheaper money on global markets and offer it to Estonian business owners."

The payout will be made in a lump sum, and not capped at €10,000 with the remaining money to be paid out in two halves later, as currently included in the bill, Kokk said.

The new date for the entry of force of the pension reform is January 1, 2021, with the first payouts from the second pillar set to be made September 1 the same year.

Kokk described the proposed change to the bill that would exclude second pillar payouts from the calculation of an individual's basic tax exemption as one of the most important among those changes approved by the committee.

"When people withdraw €2,000-3,000 and their current income is such that they get €500 tax exempt, that would not be taxed either," he said.

The pension reform bill passed its first reading in the Riigikogu on December 2.

Sutt: This bill dismantles 17 years of work

Commenting on the approved changes to the bill, Finance Committee member Andres Sutt (Reform) said that he was "ashamed and sad" over how the country is being destroyed.

"The Finance Committee has voted — 955 of 956 proposed changes were rejected 5:6 (opposition:coalition)," Sutt said, adding that one proposal did not receive a single vote in its favor.

According to the opposition committee member, proposals to receive the blessing of coalition votes were those supporting one goal — to take out as much money as fast as possible, and with tax incentives.

"I did not consider it possible to participate in the vote on these principles in their proposed form," Sutt said. "If specific proposals had been on the table, I would have voted against them. As I will do so in the Session Hall of the Riigikogu."

According to the Reform MP, the government will tie the dismantling of the second pillar to a confidence vote next week in order to pass the bill quickly and without any substantive discussion.

"And so the Riigikogu will vote on a bill that dismantles Estonia's pension system, which has been 17 years in the making and improving," he said. "What will become of pensions and pensioners and the broken pension system is not the government's concern. But responsibility for the consequences of this bill will lie with Prime Minister Jüri Ratas (Center) personally, as well as with those MPs who vote in its favor."


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Editor: Aili Vahtla

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