Sulge

Frequently asked questions

If you are a tax resident within the meaning of the Income Tax Act (your place of residence is Estonia or your are staying in Estonia for at least 183 days of 12 consecutive calendar months) and you were born in 1983 or later, your employer is obliged to withhold the funded pension contribution from your gross salary.
Upon arrival of the term, the employer will withhold 2% of your gross salary and send it, together with the social tax, to the Tax and Customs Board. The Tax Board separates the 4% from the social tax paid for the persons who have subscribed to the funded pension (the state will keep 29%), adds 2% to it and sends the sums to the bank account of the Estonian Central Securities Depository in the state treasury. The Estonian Central Securities Depository will establish your choice of the fund based on the register and directs the money to the pension fund chosen by you.

You will see the units at your account immediately after your funded pension contributions have been transferred from the Tax and Customs Board to the ECSD and the units have been issued. There may be several reasons why money has not been received to your account:

  • the employer failed to withhold the funded pension contribution from your salary
  • the employer withheld the contribution, but has failed to forward it to the Tax and Customs Board
  • the employer forwarded the withheld contribution to the Tax and Customs Board, but failed to add the tax declaration
  • there are mistakes in the declaration sent by the employer

We recommend that you first contact your employer to find out if the funded pension contributions withheld by your employer and the declaration have been sent to the Tax and Customs Board as required, or contact the Tax and Customs Board directly.

If you have no income from salary in Estonia, the funded pension contributions to the second pillar are interrupted. The collected units will be kept at your pension account until you have reached the retirement age and based on Estonian legislation, you have the right to receive payments from the funded pension. The manner of payments depends on the total value of the pension account.

However, one must keep in mind that due to the fact that the units of the pension fund are open to investment risks, the value of the units of the pension account may decrease or increase.

The units of the mandatory funded pension can be inherited. The successors have the right to submit an application for redemption of the units (i.e. withdrawal in money) within one year (if the successor has subscribed to the second pillar) or 10 years (if the successor has not subscribed to the second pillar).

In order to carry out the succession procedure, the successors must first contact a notary. After a succession certificate has been received, the successors have to file an application to a suitable bank office for inheriting the units.

If the units are withdrawn in money, income tax must be paid on the sum of payment.

Money collected as mandatory funded pension cannot be withdrawn before reaching the retirement age.

Banks are obliged to keep the assets of the pension funds separate from other assets of the bank (e.g. funds granted as loans). The depository and the Financial Supervision Authority carry out supervision over performance of that rule.

After you have joined the funded pension system and started making funded pension contributions, units of a funded pension fund will be acquired for you for your contributions. As owner of the units, you are one of the shareholders of the fund and you become an investor.

As shareholder and investor of the fund, the state has, through its legislation, established several protective mechanisms for the investors – laid down requirements for the management of the fund and assets of the fund, restrictions to investment, established rules for compensating damages caused to investors and created national as well as internal supervisory structure for the funds.

The Financial Supervision Authority carries out supervision over the activities of the funds. The activities of the funds are regulated with the Investment Funds Act, Funded Pensions Act and Guarantee Fund Act. If a fund is dissolved, each owner of units will acquire for the money subject to distribution pursuant to the Funded Pensions Act, a respective number of units of another mandatory funded pension chosen by the person or if no choice is made, assigned by the Financial Supervision Authority.

According to the Guarantee Fund Act, if a person loses money, the state will pay, based on the law, fully back €10,000 of the lost money. The rest of the money allocated to the fund will be refunded to the extent of 90%.

The sum of the mandatory funded pension cannot be transferred to the supplementary funded pension fund.