According to Minister of Finance Martin Helme (EKRE), the plan is for the Riigikogu to approve the second pension pillar reform bill by the end of 2019, with the amended legislation to enter into force on Jan. 1, 2020. Those interested in leaving the second pension pillar can begin submitting applications to do so starting next July; the first disbursements are expected to be made in early 2021.
The bill will be submitted to the Riigikogu for the first round of discussions in October, Helme said at Thursday's press conference.
"By the end of the year, [the bill] should be approved by the end of the year, and enter into force at the beginning of next year," he explained. "Beginning next July, people should be able to apply to leave the second pillar. The deadline for the first submissions should be Aug. 31, so that it coincides with the state budget process. The first disbursements will be made starting at the beginning of 2021."
According to the current draft of the bill, disbursements will start taking place three times per year, as is currently the case when an individual switches pension funds. Up to €10,000 will be disbursed at once; if an individual is interested in withdrawing a larger sum than that, it will be disbursed in three parts.
Helme noted that people will be able to withdraw all of the money accrued in their second pillar account, i.e. both the 2 percent paid from one's own wages as well as the 4 percent paid by the state from social tax. Withdrawing money from one's second pillar account, however, will impact the size of their old age pension.
20 percent in income taxes must also be paid on money withdrawn from the pillar.
"We hope that pension funds will become more efficient as a result, i.e. banks will make more of an effort," the finance minister said. "We expect that a certain amount of people will sign up, but it's likely that a larger number will leave [the second pillar]." A relevant questionnaire is currently being conducted, he added, the results of which will be revealed early next month.
Prime Minister Jüri Ratas (Centre) said that what is most important is the increased freedom of choice that this reform will mean.
"People can continue saving the same way," Ratas said. "One option will be to stop paying into the second pillar, but leave already accrued savings in the pension fund. One will also be able to stop making payments and also withdraw the accrued money."
The prime minister noted that it was agreed at Thursday's government meeting that those who decide to exit the second pillar will be able to rejoin it again after a period of time. "This period should be some ten years or so," he added.
Editor: Aili Vahtla