Reform and Eesti 200's party councils are set to approve the new coalition agreement on Saturday.

Under the new agreement, the Estonian government plans to reduce the wait time for rejoining the second pension pillar from ten years to five.

"We will restore the three-pillar pension system in a more flexible form than originally, to improve the long-term sustainability of the pension system and the livelihoods of future pensioners," the coalition agreement draft states.

"We will strengthen the three-pillar pension system so that those retiring in the future can receive a dignified pension, and allow those who have left the second pillar to rejoin after five years," the draft says.

Under the new agreement, the burden of Estonia's car tax will depend on the number of minor children one has.

"We will ease the motor vehicle tax burden for each minor child, and additionally invest an amount equal to the annual tax in roads," the document states.

The government also plans to continue developing Tallinn-Pärnu Highway and Tallinn-Tartu Highway into 2+2 roads, or four-lane highways.

It plans to begin construction work on a section of Tallinn-Pärnu Highway in the fourth quarter of this year, and a section of Tallinn-Tartu Highway in the fourth quarter of 2026.

"To reduce fatalities and injuries, we will adopt a new traffic safety program prioritizing smarter oversight, safer roads and changes in traffic behavior," the draft states.

The agreement also includes the intention to pass a credit information sharing law to establish a credit register through which lenders can verify borrowers' financial obligations.

Michal: Coalition agreement will fix Estonia's tax system

Prime Minister Kristen Michal (Reform) emphasized that the implementation of Reform and Eesti 200's new coalition agreement will simplify the country's tax system and leave Estonians feeling more secure.

"First of all, defense will be made bulletproof — Estonia's security and people's confidence will grow," he explained. "Second, we will eliminate the progressive income tax, and our tax system will once again be one of the simplest in Europe. Third, pensioners will gain the long-awaited assurance that their pensions will grow."

The head of government acknowledged that all of these points in the agreement have their opponents.

"The first is disliked by those who support Putin, the second by those who want more state redistribution, and the third by those who think pensions should be cut," Michal said. "Bad news for them, but good news for the people of Estonia."

The coalition agreement also includes the following points: the progressive income tax system with its hump will be abolished; the indexation of pensions will continue; a career model for active-duty troops will be completed in the first quarter of 2026; servicemember salaries will rise; and benefits and assembly allowances for conscripts and reservists will be raised in the fourth quarter of 2026.

The core of the coalition agreement, along with reform plans, was negotiated over the course of two months.

Estonia's ruling coalition originally included the Social Democratic Party (SDE), but after SDE was ousted in March, Reform and Eesti 200 formed a two-party government.

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