The Ministry of Finance is developing legislation that concerns the second and third pillars. Activities in this field are coordinated by the Insurance Policy Department. The given role is fulfilled by the Ministry of Social Affairs, in the case of the first pillar.
Contact:Siiri Tõniste, Head of the Insurance Policy Department 613487 |
I PILLAR
State pension
The first pillar pension is paid by the state, to all people when they reach the age of retirement. Its amount depends on the service period and salary of the person.
The state pays the pensions of the first pillar from the social tax received from the salaries of working people. The increase in pensions also depends on this: 80 percent of the pension index is formed by the change in the receipts of the pension insurance part of the social tax and 20 percent is the change in the consumer price index.
The increase in pensions for example will be curbed, if in the future, the number of people working will decrease and the number of retired persons increases, as this also curbs the receipts in social tax.
Find out more:
Read here about making a personal pension plan and how the amount of your pension is formed.
II PILLAR.
Mandatory funded pension
It is possible from 2021, for all working people to contribute additional funds into the second pillar. The larger the income of a person, the greater is the benefit of the second pillar, to him/her.
Two percent of the gross salary, will in the future go into it, once the pillar has been joined. Four percent of the social tax paid on behalf of the employee, will be added to the second pillar, instead of the first pillar. It is possible from autumn 2021, in addition to pension funds, to channel one’s payments to a pension investment account (PIA) and invest oneself.
The growth of a person's pension fund depends on the selected fund or in the case of using a PIA, the investment decisions made by oneself. It is if necessary, also possible to take the pension funds into use, prior to the age of retirement, but at the age of retirement, it is considerably more favourable.
Find out more:
All the required information about joining the II pillar, making contributions, different investment possibilities and pension payments, is gathered together on the website of the pension register.
III PILLAR
Supplementary funded pension
It is possible in the third pillar, to collect further supplements to the first and/or second pillar. It is possible to claim back income tax paid on the amounts contributed to it that do not exceed 15 percent of the person’s gross income or 6 000 Euros per year.
The person in the third pillar, selects oneself the amount of the contribution. The amount of savings can be increased or decreased, according to possibilities and needs, as well as payments may be temporarily suspended.
It is also possible at any time to withdraw funds from the third pillar, but it is considerably more favourable, at the age of retirement.
Find out more:
You will find all the required information about joining the third pillar, the funds and insurance companies, as well as making contributions on the website, of the pension centre.
The best way of preparing for retirement and mitigating the risks of the different pillars, is by using the possibilities of all pillars.
Last updated: 01.12.2022
