Research: Support for second pillar abolition slightly ahead of opposition

Erki Savisaar (Centre, at right of picture) and Jürgen Ligi (Reform) discussed the abolition of the second pillar of Estonia's pension system on current affairs show
Erki Savisaar (Centre, at right of picture) and Jürgen Ligi (Reform) discussed the abolition of the second pillar of Estonia's pension system on current affairs show "Otse uudistemajast" Wednesday morning, with ERR's Indrek Kiisler (left). Source: Siim Lõvi /ERR

More people support making the so-called second pillar of Estonia's pension system voluntary, than retaining it as mandatory, according to research.

The second pillar refers to mandatory contributions to pension pots made by employees, as against employers (first pillar) or private pension funds (third pillar). This was made mandatory in 2010, for a large part of the populace, though individuals were given the opporunity to opt out at the time.

Abolishing the second pillar was a flagship policy of Isamaa, one of three parties now in office, during the general election campaign, though it did not manage to get the policy into the coalition agreement.

New research by pollster Turu-uuringute AS showed 55 percent of respondents in favor of making the second pillar voluntary, with 32 percent responding with a "definitely yes", and 23 percent choosing "ideally yes".

Twenty four percent of respondents opposed abolishing the second pillar, with a 50-50 split on whether this was a certainty or a preference, and the remainder expressed no opinion, BNS reports, citing ERR's online Estonian news.

The desire cuts across political party preferences too; in fact of those polled, Conservative People's Party of Estonia (EKRE) supporters were most in favor of axing the voluntary second pillar, on 67 percent, compared with 60 percent for Isamaa. However, small majorities were to be found with supporters of the other three parliamentary parties, Reform (56 percent), the Social Democratic Party (SDE – 53 percent) and Centre (51 percent).

Only among Estonia 200 supporters were voluntary second pillar opponents in a minority, and even then not by much, at 45 percent.

Amongst those already locked into the second pillar, 62 percent would like the status to change to voluntary, with 53 percent of those in third pillar (personal private pension) schemes agreeing on this.

Potentially abandoning the second pillar altogether, ie. Voluntary or involuntary, was the choice of 44 percent of respondents already in the system, slightly ahead of those who would continue collecting in some way or another, on 43 percent.

That said, those who would unequivocally do away with the second pillar only made up 13 per cent of respondents.

The issue has been hotly debated both before and after the elections. Arguments in favor of keeping the second pillar include that lower-income individuals would lose out most from the abolition, although some have argued that the reverse is the case, even if pension funds perform in line with the economy (a charge that they have not is a common anti-second pillar argument).

The second pillar is more individual, and a better fit for those with higher incomes, whereas those on lower to average incomes still benefit more from the first pillar in isolation, some claim.

The second pillar sees a working person paying two percent of their gross salary to the pot, with the state adding four percent culled from the 33 percent social tax levied on salaries.

The second pillar is mandatory for those born in or after 1983. Those born between 1942 and 1982 had the choice to opt out, when the scheme was introduced in 2010.

According to one Centre MP, Erki Savisaar, the current Centre-led coalition will not put second pillar abolition on the table within the next year, though that it could happen in 2021-2022.

Appearing on ERR current affairs show "Otse uudistemajast" (link in Estonian), Savisaar also said that no pension hikes were likely in the next year either.

Savisaar's interlocutor on the show, Jürgen Ligi (Reform), stated that the abolition would be a mistake, and that only around a fifth of Estonians had a sufficient grasp of economics and demographics to be able to cope with a voluntary second pillar system, adding that Estonia did not on the whole have levels of accumulated savings on a par with many western countries.

Editor: Andrew Whyte

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