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Contributions

A contribution to the funded pension consists of two components:

  • The withholding from salary, which constitutes 2% of the employee’s monthly gross salary. It shall be withheld by the employer’s accountant
  • The payment made by the state out of the social tax paid by the employee; the contribution made by the employer is 4% of the employee’s monthly gross salary. Thus the state retains 33%-4%= 29% of the social tax. The 4% of the social tax is added to the 2% paid by the employee by the Tax Board.

Example: If an employee earns a gross salary of €1,000 per month, he or she will pay 2% or €20 per month to his or her pension account if they subscribe to a funded pension. The state will add another 4% or €40, which means that in total, €60 per month will transfer to the employee’s pension account.

Although the contributions to the funded pension will be withheld by the employer, the actual payer is still the employee. It means that the contributions are not connected to the employer and change of employer will not prevent or affect saving for the funded pension.

NB! Contributions can be made only to one selected fund at a time.

A person who is a sole proprietor and has subscribed to the mandatory funded pension can accrue the funded pension from the annual business income, which is declared to the Tax Board by 31 March of the following year. For sole proprietors, the period for the payment of the contributions is one calendar year.

If a sole proprietor has subscribed to the funded pension, the Tax Board will calculate the 2% contribution on the basis of their income tax declaration and issues a tax notice on the payable sum by no later than 1 September. The sole proprietors are obliged to transfer the payable sum to the bank account of the Tax Board by 1 October. The Tax Board will calculate an additional 4% from the 33% social tax from the business income, which is to be added to the contribution.