Isamaa leader: Second pillar pension payments suspension up to president

Isamaa chair Helir-Valdor Seeder.
Isamaa chair Helir-Valdor Seeder. Source: Siim Lõvi /ERR

Isamaa leader Helir-Valdor Seeder says it is up to President Kersti Kaljulaid whether to suspend second pillar pension contributions in the wake of the coronavirus pandemic, though only if she takes a pre-existing dispute over reforms to the system to the Supreme Court.

The president returned the bill, which would make membership of the second pillar, referring to employee contributions matched by the state, optional rather than mandatory, to the Riigikogu in early February.

The bill had passed its second reading, but faced opposition. The bill can be taken to the Supreme Court for judgement.

"If the president promulgates the Pension Reform Act and it should come into force as approved by the Riigikogu, then it would be unwise to suspend second pillar pension payments now," Seeder, whose party championed the reforms and got them into the coalition deal signed with the Center Party and the Conservative People's Party of Estonia (EKRE) last April, told ERR Friday.

If this did not happen, there would later be an overlap between the two laws (i.e. the original reform and the bill postponing payments to the second pillar) which would lead to further legal complications, Seeder said.

Earlier this week, finance minister Martin Helme (EKRE) joined Seeder's call to suspend second pillar payments as a means to bolster the economy in the wake of the coronavirus pandemic.

If the president takes the dispute to the Supreme Court, pension reform would be postponed indefinitely, which, Seeder said, could successfully lead to the suspension of second pillar payments by the state for as much as a year and a half, in order to deal with the economic fallout from the coronavirus pandemic.

"The first moment of clarity and where we would decide whether or not to suspend second pillar payments depends on whether the president promulgates the pensions law or not," Seeder noted.

The coalition is currently planning, as was the case with the previous economic crisis in 2008-2010, to suspend state contributions to the second pension fund for a year and a half. The exact details have not yet been agreed, but this would save about € 200 million in national budgets this year, they say.

Seeder said this means that the state will stop contributing for one and a half years to the pension accounts of people who have joined the second pillar pension fund.  All employees would then have the choice whether to continue contributing or not.

If a person continues to contribute, the state would pay up their part of the second pillar if and when the second pillar contributions were back on the table.

During the previous crisis, people were also able to start paying three percent of their salary instead of the current two percent, to another pension fund, to which the state then added four percent a month. Seeder says this option should be further discussed.

The Riigikogu passed the Pension Reform Act unchanged for the second time on March 11. President Kersti Kaljulaid will have until March 30 to decide whether to proclaim the law or send it to the Supreme Court.

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Editor: Andrew Whyte

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