According to Bank of Estonia Governor Ardo Hansson, making the second pension pillar voluntary would be a negative step that would result in an even more rapid increase in prices, increased burden on businesses' expenditures and profitability, and a long-lasting blow to wage growth.
"The second pillar fund includes several elements which could be much better solved so that it would result in higher pensions," Mr Hansson told BNS. "The Bank of Estonia's position in general is that fixing the second pillar is more sensible than dismantling it."
The head of the central bank said that if the savings gathered in second pillar funds were used immediately, it may overheat the economy and in the long term jeopardise the sustainability of the entire system.
Reckless changes reduce trust in the pension system, the Bank of Estonia said. The mandatory pillar, meanwhile, increases motivation to receive legal wages and thus helps tackle the shadow economy and envelope wages.
The central bank said that the first pillar concerns investments in Estonia, while investments from the second pillar are mainly made abroad, and so the system helps to mitigate risks. The second pillar also helps reduce dependency on everyday politics. As the rights relating to the second pillar are tied to the person, they are less dependent on politicians' assessments of the day than first pillar funds.
The central bank sees no sensible alternative to mandatory saving and points out that eliminating the second pillar fund would result in further decline in pensioners' relative income, an increase in tax burden and a more rapid increase in the retirement age.
The Bank of Estonia said that it has offered the thee parties currently engaged in coalition talks — the Centre Party, Isamaa and the Conservative People's Party of Estonia (EKRE) — the opportunity to be advised on all matters within the central bank's competence and remains willing to offer its expertise. This first and foremost regards the general economic situation, public finances, labour market and competitiveness.
Eliminating the currently mandatory second pillar pension funds was one of Isamaa's campaign promises.
Editor: Aili Vahtla