Estland
The pension system is divided into three pillars:
Pillar I is the state pension.
The state pension is divided into two: pensions based on work contributions (old-age pension, work incapacity pension and survivor’s pension) and the national pension.
State pension payments are made from social insurance that is paid on work remuneration. Employers pay 33% of an employee’s wage as social insurance, out of which 13% goes towards health insurance and 20% towards pensions to current pensioners. It is also possible to receive old-age pension under favourable conditions or deferred old-age pension, which are both sub-types of the state pension. Another sub-type of state pension available is early-retirement pension. In addition, there are survivor’s pension and work incapacity pension.
Pillar II or mandatory funded pension
The funded pension is based on what is known as the 2+4 formula, in which the state and the person to receive the pension are parties. The funded pension is a mandatory guaranteed periodic benefit, for the receipt of which units of a mandatory pension fund are acquired from solidarity payments paid on behalf of the person and the person’s own contribution, and which is paid from the pension fund or by an insurer.
For the receipt of the funded pension, units of a pension fund are acquired or an insurance contract for a funded pension is entered into. In order to join a funded pension scheme, you need to choose a pension fund and thereafter 2% of your gross salary will go into your personal pension account to which the state will add 4% of the social insurance paid by your employer.
The funded pension scheme is mandatory in Estonia for all persons born after 31 December 1982. Upon starting a job, a person has to choose a pension fund to which money will start accruing a year after that person starts work. If a person does not choose a pension fund, he or she will be allocated one by a draw. Pension payments may commence once the person has reached pensionable age at the age of 63. You can join the funded pension scheme in all major banks of Estonia: Hansabank, Ãœhispank, Nordea Bank, Sampo Bank.
Pillar III or supplementary funded pension
Supplementary funded pension gives an additional boost to your state pension. For the receipt of the supplementary funded pension you have to acquire units of a voluntary pension fund or have entered into an insurance contract with a chosen insurer for a supplementary funded pension.
Further information on the pension system is available from the pension offices of the Social Insurance Board and its Internet website. There is useful information also on the Pension Centre portal on the Internet.
