Justice chancellor: Pension scheme legislation not unconstitutional

Ülle Madise.
Ülle Madise. Source: ERR

The legal framework governing the compensation of suspended contributions to the Estonian pensions system does not run counter to the constitution, Chancellor of Justice Ülle Madise says, particularly in relation to the availability of timely information ahead of making a decision on whether to leave the so-called second pillar scheme.

"There are no grounds to consider the provisions of law regulating the compensation of suspended contributions to the second pension pillar unconstitutional," the justice chancellor said.

Those who wanted to leave the second pillar, referring to employer-employee contributions, had had enough time to make an informed decision, she said. Madise said: "It cannot be said that there was too little time to decide on leaving the second pillar or doing so. Information on the details of compensation for suspension of payments could also be obtained from public information channels before the deadline for withdrawing the application to leave the second pillar," the justice chancellor said, adding that individuals could have also suspended their second pillar contributions.

"Until July 31, 2021, it was also possible to withdraw the application to leave the second pillar," Madise added.

The justice chancellor had been approached by an individual who had requested an assessment a situation where those choosing to leave the second pillar had not been compensated to the equivalent of the average return of pension funds over the period when state contributions to the second pillar were suspended.

The individuals claimed that they could not make an informed decision about leaving the second pension pillar, as they were not aware that doing so would have not been compensated for, along these lines.

Second pillar membership had until a legal change last year been mandatory for most wage earners,

In her reply to the complainant, the justice chancellor said that, unfortunately, not all pension savers may have known all the effects of leaving the second pillar.

At the same time, she pointed out that, albeit during the initial wave of the coronavirus crisis, in the law passed on April 15 last year, these effects had been set out.

Given that the law regulating the suspension of payments and compensation for suspension was adopted on April 15, 2020 and entered into force on July 1, 2020, Madise says she estimates that these 11 weeks were sufficient time to read the law, consider its terms and make informed decisions based on that.

Those leaving the second pillar also had more than one option, including suspending payments to the second pillar instead of taking the compensation once state payments were halted, which, she added, would be logical given the putative individual had chosen to leave the scheme in any case.

Applications to leave the scheme were not set in stone, and could be withdrawn, she added, until July 31 this year,

Individuals who continue to collect money in the second pillar are compensated for both the temporarily suspended state contributions and the average return of pension funds, BNS reports.

At the same time, those leaving the second pillar are compensated for the state contributions, but they are not compensated for the average return of pension funds.


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Editor: Andrew Whyte

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