Next month the Estonian Central Bank (ECB) will announce the results of a major study into the financial behaviour of Estonians. Jaanika Meriküll, an economist at ECB, told AK that few families have independent investment experience. Less than five percent have equities and even fewer have investment funds.

"This shows that Estonian families have very little diversified financial assets, mostly it is in deposits. In principle, they earn no or very little income there, and this is striking compared to other euro area countries," said Meriküll.

At the same time, the survey also shows that the financial literacy of Estonians is good. The basics of how and where to invest, as well as the fact that deposited money does not increase in value and is wiped-out by inflation, is well known to people. 

So, AK asked, why are they strong in theory but not in practice?

"Households are very risk-averse, somewhere between 75 and 80 percent of households are not prepared to take any financial risk," Meriküll answered.

According to Merlin, it will be interesting to see what is going to happen now. "This current data does not in any way confirm that households will start investing in riskier products on their own. I think we see a lot of cases where the money just stays in the bank and does not generate significant income," she said.

Stock Exchange journalist Juhan Lang of business newspaper Äripäev, gave some advice to AK viewers. He said two or three books are enough to educate oneself about investing and the stock exchange. 

"Invest a hundred euros in your education, now read the books, just invest in index funds as passively as possible, at the lowest possible cost and as little as possible, keep track of those investments," he said.

Changes to second pillar pension fund

Whether or not Estonians invest is a question that has arisen because of changes to the second pillar of the pension fund.

The second pillar refers to mandatory employee pension contributions (employer contributions represent the first pillar, with the third pillar being voluntary, privately-arranged contributions). Abolishing it was a central plank of Isamaa's election manifesto and could come into law in 2020.

The pension reform will make it optional to both join or leave the second pension pillar. Proposed changes presented by political parties will allow savers to withdraw funds and invest, or spend them, them how they like before they reach retirement age.

Under current law and since the second pillar is mandatory, there is no provision for early payment of pensions, it is reported, nor whether there will be in future, with or without a penalty.

At the start of October, an impact analysis by the ECB will be released that will show how the proposed changes will impact the economy.

In July, the International Monetary Fund expressed concerns about the proposed pension reforms in Estonia, on the grounds of budgetary risk, long term effects, and the lack of in-depth analysis.

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