Close to 10,000 people apply for second pillar pension payment hiatus

The second pillar refers to employer/employee pension contributions, and membership will be voluntary from next year.
The second pillar refers to employer/employee pension contributions, and membership will be voluntary from next year. Source: Priit Mürk/ERR

9,575 people applied for a temporary suspension of second pillar pension payments in October. The suspension period would run from December to September 2021.

The finance ministry says that firms need to be up-to-date on what their employees have decided on suspending payments, which heralds, though is not directly connected to, a law change coming into effect from January 1 making membership of the so-called second pillar of the Estonian pension system, referring to employer/employee contributions, voluntary.

"We would like to remind the accountants at companies that in the second half of November that it is a good idea to make an inquiry to the pension center on whether employees who are in the second pillar will continue to collect, or have temporarily given it up," Siiri Tõniste, head of the ministry's insurance policy department, said via a press release.

Tõniste added that for those who plan to stay in the second pillar, accountants will have to continue withholding 2 percent of salaries and send that, together with the taxes withheld from that salary component, to the Tax Board (MTA), which will in turn transfer the sum to the pensions center (Pensionikeskus).

Temporary suspension does not equate to full withdrawal from second pillar

Those who suspended their payments will in other words get a 2 percent higher salary during the period.

The state suspended payments to the second pillar from social tax from July 1 this year, planned until the end of August 2021. In October, pension collectors, i.e. wage-earners signed up to the scheme, were permitted to decide whether to suspend payments of 2 percent of their salary from December this year.

The second pillar was installed in 2010 and, while opt-in or opt-out was possible at that time, since then it has been mandatory for most wage-earners.

The temporary suspension of payments is not linked to the reform of the second pillar, BNS reports, and normal payment will automatically resume in September 2021. While the law reforming the pension system comes into effect from January 1, it will be many months before people will be able to cash out what they had accumulated so far.

The suspension or continuation of payments will also in no way affect the new options that will emerge in the second pillar from 2021 onwards, BNS reports. All those who wish can then leave the second pillar permanently, regardless of whether their payments had been suspended or not.

The finance ministry says many accounting programs have already been interfaced with the pension center's subscription request. If an accounting software program is used for payroll, the software owner should first be contacted in case of any queries, it is reported.


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Editor: Andrew Whyte

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