Estonia’s Ministry of Finance is consulting on whether to allow savers in the second pillar pension system to voluntarily contribute more to their pensions.

The country’s Minister of Finance, Keit Pentus-Rosimannus, said that the change would enable people to increase their pension savings and secure a larger pension in the future.

"A large part of the Estonian people continue to accumulate pensions in the second pillar. If the changes are approved, there will be an additional opportunity to increase contributions.”
The Ministry of Finance is proposing to allow people to save at a rate of 4 per cent, or 6 per cent, in addition to the current 2 per cent rate. Pension savers would need to apply to change their rate of saving and can opt to change this rate once a year. The new rate would take effect from 1 January.

The proposal only concerns the 2 per cent deduction from a person's salary; the increase in the rate of payment of the funded pension part of the social tax (4 per cent) is not affected. Therefore, the proposed changes do not affect the budget of the first pillar or the pension rights earned in that pillar.

The Estonian pension system consists of three pillars, the first two of which should guarantee an average pension of 40 per cent of the average salary. The government states that the rest should be saved in the third pillar or using other options outside the pension system.

Although membership of the third pillar has risen sharply in recent years, it is still little used in practice and savings in retirement are generally low. In comparison with OECD countries, Estonia is well below average in terms of pension savings. In 2019 pension assets accounted for more than 90 per cent of the GDP of OECD countries, the corresponding share in Estonia was only 18 per cent.

In several countries, it is possible for a person or their employer to make additional voluntary contributions to statutory or semi-statutory pension schemes, including raising the minimum contribution rate to such a scheme.

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