President Kersti Kaljulaid did not proclaim and returned to the Riigikogu the mandatory funded pension reform bill that would render joining the so-called second pension pillar voluntary and make it possible for people to withdraw second pillar savings before retirement.
President Kersti Kaljulaid said it is clear she wouldn't veto the law for political reasons. "I analyzed it strictly from a constitutional point of view. What I think about the reform is inconsequential. It is the president's duty to exercise control over the legal environment. The bill at hand infringes on the Constitution enough to warrant returning the bill to the parliament," Kaljulaid said.
Regarding unconstitutional aspects, the president said the law would allow people to withdraw not only 2 percent of pay they've contributed themselves, but also 4 percent of social tax added by the state.
"It is clearly a tax for the purpose of pension and national health insurance. If these sums are withdrawn, it clearly alters the purpose of the instrument. And that is unconstitional," Kaljulaid explained.
The president also said the law infringes on insurance providers' entrepreneurial freedom if people are given the right to revoke contracts. Kaljulaid said that withdrawal of pension fund assets and their free use hurts the ability of the pension system to peform its functions. As the number of pensioners is growing and the number of working-age people set to fall, the president finds the reform could increase the number of people looking at risk of poverty in the future.
The president added she made her decision after consulting with lawyers and former Supreme Court chief justices and that sworn lawyer Madis Päts helped her phrase her decision.
The Riigikogu now has two options – either to amend the reform or pass the bill again unchanged. In the latter case, the president would have to decide again whether to proclaim the law or forward it to the Supreme Court.
The Riigikogu passed the mandatory funded pension reform bill on January 29, after hours of deliberations, with 56 votes for and 45 against. The government tied the vote to a confidence motion to avoid opposition stalling tactics.
The reform seeks to allow people to decide whether to join or leave the second pillar. People who wish to continue saving for retirement as they have will not have to do anything. If a person wants to leave the pillar, join it or stop making payments, they need to submit an application to the bank or pension center. As a new opportunity, people would also get the chance to invest their existing pension assets themselves.
Editor: Marcus Turovski