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Seeder: Second pension pillar should be made voluntary, then abolished

Pro Patria Party chairman Helir-Valdor Seeder.
Pro Patria Party chairman Helir-Valdor Seeder. Source: Anna Aurelia Minev/ERR

Speaking with ERR, Pro Patria Party chairman Helir-Valdor Seeder said that making the second pension pillar, which is currently mandatory for all persons born in 1983 or later, voluntary will be one of his party's most important campaign promises. According to Seeder, however, this would only be an intermediate step as the goal would be to abolish the second pillar altogether.

Seeder has previously toyed with the idea of abolishing the second pillar, but until now had not received clear support from the party for it. Now he is promising that the topic of the second pension pillar will be a central topic in Pro Patria's election platform.

"This is definitely a topic that we will address in our election platform," the party chairman confirmed to ERR. "Internal discussions are currently still underway, and when we have completed our programme by December, the reorganisation of the pension system will definitely be reflected in it."

Seeder described making the second pension pillar voluntary as a transition period toward its total abolishment.

"A large number of Estonian politicians, banks and financial institutions are not yet ready for the step of losing the second pension pillar, but this should definitely be the end goal," he said.

According to the party chairman, that the second pillar isn't reasonable is both proven by practice as well as admitted by an increasing number of experts.

"This is setting money on fire," he said. "This is detrimental to future pensioners, who have been forced by requirement to join this second pillar. This is detrimental to today's pensioners, where the 4% is taken at the expense of the first pillar. And this is detrimental to Estonia's economy, as €300 million is just removed from the Estonian economy. This kind of wasting of money needs to be stopped as quickly as possible. If it means doing this step by step, first through a voluntary step, then that is a compromise. Although that is a longer and more difficult road."

According to Seeder, it would be reasonable to make the second pillar voluntary for everyone, not just certain target groups.

Should the second pillar be abolished or made voluntary, he stressed, all of the money that has been accumulated by someone will remain in their hands.

Pro Patria Secretary General Priit Sibul spoke about the idea of making the second pillar voluntary on ETV's Aktuaalne kaamera news broadcast last Friday, tying it to lowering the income tax.

"If we're talking about pensions, if the second pillar is voluntary, people's income tax will drop 2%," Sibul said.

According to Seeder, however, these two issues do not have to be tied to each other at all. He said that after the second pillar is abolished or made voluntary, various options will be possible.

"Do we decrease people's tax burden and is this that income tax or something else entirely — that's one point at which to choose," he said. "Or we spend this money on certain essential long-term investments, or some kind of structural changes. Or we contribute to solving problems related to demographic processes."

Estonia's pension system currently rests on three pillars — the first is a state pension, the second is a mandatory funded pension, and the third is a supplementary funded pension.

The second pension pillar in question is mandatory for everyone born in 1983 or later. Once someone has joined the second pillar, 2% of an individual's gross wages are directed to a personal pension fund, to which 4% is added by the state, making up a monthly 6% funded pension payment.


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Editor: Aili Vahtla

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