Estonian Pension System
The Estonian pensions system is built on three pillars. The first pillar is the state funded pension, providing a minimal income. Investing in the second and the third pillar pension funds will help you to maintain and sustain your current living standard at retirement age.
I Pillar or State Funded Pension
- Mandatory payments from social tax.
- It is based on the principle of redistribution, i.e. the social tax paid by today’s employees covers the pensions of today’s pensioners.
- Joining the II pillar pension fund will reduce the contributions to I pillar pension fund from 20% of state social tax to 16% of state social tax.
II Pillar or Mandatory Funded Pension
- Mandatory for all residents born in 1983 or later (all residents born before 1977 can not join II pillar any more).
- While you join you can choose the II pillar pension fund and the strategy that you like. The choice of pension fund can be changed once a year.
- 2% of the investment will be added from your gross salary and 4% will be added by the Tax and Customs Board from your social security tax.
- You are entitled to get payments from the pension fund after you have reached retirement age.
- All II pillar pension fund units are inheritable.
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III Pillar or Supplementary Funded Pension
- Contributions are voluntary for all persons.
- Amount of contribution is determined by your self and it’s changeable.
- Possible to change the pension fund.
- Possible to discontinue contributions (also to finish the contract).
- Benefit of income tax from the yearly contributions.
- You can use the acquired sum at the age of 55.
- Monthly or quarterly made payments are free from income tax
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