The total volume of Estonia's second pillar pension funds has exceeded €7bn for the first time, according to data from the Estonian Funded Pension Registry, reaching a historic level not seen even before the second pillar pension reform.

The Estonian 2021 pension reform transformed its mandatory funded second pillar into a fully voluntary scheme and allowed participants to withdraw their accumulated savings before retirement.

Estonia’s Swedbank explained that after the reform, the volume of second pillar funds fell to €3.9bn over the year but recovered to its previous level in May 2024 and has continued to grow since.

This autumn marks the fifth anniversary of the reform, and Swedbank explained that although public debate may occasionally give the impression that money is primarily withdrawn from the second pillar, actual statistics indicate the opposite.

Figures show that approximately 500,000 people continue to save in the second pillar, and the amounts invested in pension funds have reached a “historical record”.

One in five savers (nearly 100,000 people) have increased their monthly pension fund contributions by 4 or 6 per cent, indicating that saving for the future is important.

The pension funds managed by Swedbank hold approximately 40 per cent, or nearly €2.8bn, of the total assets of the second pension pillar.

While savers had accumulated an average of €8,300 during the first pay out period, the average amount accumulated has now grown to around €12,000.

This growth has been supported by wage increases, higher voluntary contributions, and good returns from the funds.

The average age of a Swedbank second pillar customer is 40, and the gender distribution is broadly balanced, with 51 per cent being women and 49 per cent being men.  

However, Swedbank acknowledged the gender gap in the amounts accumulated in pensions, which reflects, among other things, the wider wage gap in the labour market.

Indeed, figures show that men have accumulated an average of €12,820 in the second pillar, while women have accumulated €11,161, a difference of €1,660 or 12.9 per cent.

But this difference is smaller than the year before, when the gap was €1,518 or 13.6 per cent, and although the gap is narrowing, the bank said it is happening at a “rather slow pace”.

Swedbank began offering unique life-cycle funds on the Estonian pension market in 2022, in which the risk level of the fund changes automatically over time with the saver's age.

According to Swedbank Investment Funds chief executive officer and board member, Age Petter, the advantage of this solution lies in the fact that a person can stay in a fund with a suitable risk level throughout the saving period without having to reconsider their investment decisions over time.

Today, over 90 per cent of Swedbank's active second pillar savers are in a fund appropriate to their age.

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