€1.3 billion withdrawn from second pension pillar so far

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€200 bill. Source: Siim Lõvi/ERR

The first period for submitting applications to leave the second pension pillar ended on Thursday and those leaving will withdraw a total of almost €1.3 billion.

Significantly more people continue to collect pensions than the November survey of pollster Turu-uuringute AS showed. In November, more than half, or 56 percent, of working-age people who joined the second pension pillar planned to continue with contributions and not withdraw the money, the Ministry of Finance said.

"It is a shame about those leaving, because giving up collecting pension money will not bring anyone a brighter retirement age, but will make it more inaccessible to many," Minister of Finance Keit Pentus-Rosimannus (Reform) said in a statement.

She added that there is an opportunity to think about the decision to leave and withdraw the application until the end of July. Altogether 1,401 people have already used this opportunity.

A total of 152,675 withdrawal applications and 2,731 applications for exemption from payment were submitted in the first quarter of this year. The average person leaving the second pillar is a middle-aged pension collector with a slightly lower income than the average salary.

While those who have joined the second pillar have collected an average of around €7,000, people who have decided to leave have collected an average of €8,468. If the amount collected is less than €2,000, it will rather not be withdrawn. There are also fewer leavers among those who have collected more than €15,000.

Kertu Fedotov, advisor at the insurance policy department of the Ministry of Finance, said the average age of a person leaving the second pillar, which is 41 years, is a bit worrying. "If the money withdrawn is not saved or used to reduce their future expenses, the impact of leaving the second pillar on retirement will be greater the higher the age it is done at," she said.

She added that even if one were to rejoin ten years later, the collection period would be quite short. "During the time in the second pillar, however, the rights of the first pillar have been earned somewhat less, which means that the pension of the first pillar will also be smaller. Thus, there is no choice but to accept a lower pension or rely on other incomes," Fedotov said.

Altogether 48 percent of those leaving are 35-49 years old, followed by 25-34-year-olds with 28 percent and 50-59-year-olds with 22 percent.

"However, there are fewer money withdrawers among those under 30 than in older age groups. The fact that the amounts collected are less attractive, as well as the fact that young people in general are more aware of investment issues than older generations, probably plays a role here," Fedotov said.

Both the number of people leaving and the amount to be paid out in September may change by the fall, as the withdrawal application can be withdrawn until the end of July. The amount to be paid out of pension funds is also affected by the performance of pension funds and the contributions that those leaving make to the second pillar until September.

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Editor: Helen Wright

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