Finance minister: Second pillar pension reform not like Brexit

Minister of Finance Martin Helme (EKRE)
Minister of Finance Martin Helme (EKRE) Source: Siim Lõvi/ERR

Finance minister Martin Helme (EKRE) has rejected claims by both the International Monetary Fund (IMF) and the Bank of Estonia, that the so-called second pillar pension reform is unwise.

Head of the IMF's delegation to Estonia, Cheikh Anta Gueye, finishing a two-week stint in the country, said at a press conference Monday morning that while the pensions system has issues with flexibility and effectiveness at present, making the second pillar – employee contributions – voluntary would be a mistake and could cause problems for those who have accumulated funds in the system so far, later generations, and the economy as a whole.

The second pillar has been mandatory for most current earners since 2010.

Martin Helme said, however, that pre-election promises were more significant.

"We have a different perspective on the matter," Helme told ERR.

"We are clearly acting within the scope of the election mandate. We have made promises to the people and those promises have to be fulfilled."

"I do not think that we should reject this plan simply because one international organization or another is recommending differently," he continued.

Removing the second pillar as a mandatory requirement was a central manifesto plank for the Isamaa party, now in coalition with Helme's party, the Conservative People's Party of Estonia (EKRE) and the Centre Party.

Helme also said that the question was not one of predictions, all of which can potentially be wrong, but rather of outlook.

"Just as in 2001 you could make all kinds of predictions and opinions about the pension system in place at the time, almost none of these have come to fruition, so in that sense it is a matter of worldview," Helme went on.

Helme also rejected the comparison of voting for the second pillar with the EU referendum in the U.K., where, it is argued, many people did not know what they were voting for when they voted to leave.

"On the contrary, public support for this reform has increased over time rather than diminished. That said, during the election campaign, there was quite a bit of confusion over the second pillar. These were later subsumed over the summer and autumn, ad we are certainly going through all these discussions again at the Riigikogu," Helme said.

Government ministers in Estonia do not sit at the Riigikogu, but appear their regularly to give an account of their actions to MPs.

Bank of Estonia chief: We're advisers, not legislators

Bank of Estonia governor Madis Müller remained on the IMF's side on the issue, as it had done before Monday's press conference, but noted that its role was only advisory.

"The idea that a mandate has been received from the electorate is being interpreted very rigidly. I think it can be interpreted in a completely different way," said Müller.

"It is in some sense inevitable that our role is to make as well-reasoned recommendations as we can, but the final decision is still in the hands of the government and the parliament, and that's as it should be. We still view ourselves as advisers, not legislators," added Müller.

If the bill to remove the mandatory aspect of the second pillar passes at the Riigikogu, it will become law at the beginning of 2020, with those wanting to remove their funds being able to do so from late on that year. Estimates vary as to how many people will actually do this.

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Editor: Andrew Whyte

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