On Monday, the Ministry of Finance announced that it would compensate almost 342,000 people a total of €270 million for suspended state payments into people's mandatory funded pension or the so-called second pillar. The payments had been suspended from an earlier time, due to state budget issues resulting from the economic impact of the coronavirus pandemic.

The money was used by the then-coalition government comprising the Center Party, EKRE and Isamaa as a loan to cover budget costs. The interest rate on the loan amounted to nine percent and has now cost the state €22 million.

"Yes, it would have been cheaper to borrow €270 million from a bank for three years. There is no question here at all. But we did it in line with the second pension pillar reform, and our assumption was that, in reality, most of these people would not resume paying into the fund," Helme said.

"We had a similar scheme in 2010, and at that time, around a third of the people did not resume payments. This time, the number was much lower and the reason (for that) may have been that these people had been waiting for the pension reform and so didn't make any changes in the meantime," he added.

ERR asked Helme whether, as minister of finance, he had been wrong to make this assumption.

"Well, consequently. However, all the predictions in the spring or summer of 2020 were wrong," Helme replied.

Helme said that despite the 9 percent interest rate, he believes the decision had not harmed the country.

"If we compare the cost of money in 2020 and in 2023, the 9 percent rate of return will be far, far below the intermediary inflation rate. So no, the state has not got it in the neck. In terms of real interest rates, we still got the money for less. In real terms, we have still paid back less than we took out of the pension system in 2020 and used elsewhere," Helme said.

According to Helme, Estonia's losses from participating in the second pension pillar are much greater. "It has cost Estonian taxpayers and the Estonian state billions and has damaged the Estonian economy, the investment capacity of the Estonian economy and Estonian pensioners for 20 years," he said. "The damage that the pension pillars have suffered as a result of falling short of actual economic growth (levels) is immeasurably higher than what we are talking about today," Helme said.

The article was updated to fix factual inaccuracies.

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