Estonian Supreme Court rules in favour of second pillar pension reform bill

A bill on reforming the second pillar of the Estonian pension system will become law on 1 January 2021 after the Supreme Court rejected a challenge from the president, Kersti Kaljulaid.

As reported by ERR, the bill, which would make the second pillar voluntary and allow savers to withdraw their funds from autumn 2021, was passed by the Estonian parliament in January 2020.

However, Kaljulaid declined to promulgate the bill at its time of passing and appealed to the Supreme Court that the bill treated people unequally in relation to the constitution.

Following the ruling, Kaljulaid has promulgated the reform bill.

Currently, the second pillar pensions in Estonia is mandatory, with workers contributing 2 per cent of their salary. The first pillar is the state pension, while the third pillar is private pensions.

The second pillar reform bill was drafted by the Isamaa Party and passed with support from the Center Party and the Conservative People’s Party of Estonia.

Estonians wishing to leave the second pillar cannot do so in instalments and must withdraw all their funds in one go, which can incur a 20 per cent tax.

Its contents have led to concerns from some that it could lead to reduced pension pots and potentially higher taxation.

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