The average second-pillar pension savings of Estonian participants have nearly doubled in the past five years, rising from €8,200 in 2021 to €15,900 in 2026, according to Swedbank.

Swedbank said this rise has been driven by pension fund returns, continued contributions, and rising wages.

Swedbank head of investment funds, Age Petter, explained that Estonia’s second pillar has developed significantly over its more than 20-year history.

“In the early years, investment restrictions on pension funds were stricter, and fees were higher. Fees have now fallen, and funds can invest their entire assets in shares,” Petter said.

“Furthermore, people now have greater control over what proportion of their salary they set aside for their pension.”

Although pension fund returns have been strong in recent years, Petter says growth in pension assets cannot be attributed solely to this.

“People’s pension assets have also grown thanks to consistent contributions, which have increased in line with rising wages,” she said.

“This shows just how important time is when saving for a pension. New money has been added to pension accounts every year, and assets invested earlier have in turn grown thanks to returns.”

She suggested that one of the most significant changes to Estonian pensions in recent years has been the option to choose what proportion of one’s salary to allocate to the second pillar.

Since last year, Estonians have been able to choose a contribution rate of 2 per cent, 4 per cent or 6 per cent of their gross salary, and a further 4 per cent is added from social security contributions.

According to Petter, the option to choose the contribution rate is particularly important for those considering re-joining the second pillar following the legislative amendment earlier this year, which reduced the waiting period for re-joining the second pillar from 10 years to five.

From 1 November, people who left the second pillar in September 2021 or in January and May 2022 can apply to re-join.

This has been a reform much advocated for by Estonian pension companies and even the Organisation for Economic Co-operation and Development (OECD) earlier this year.

“Someone who withdrew their pension savings five years ago may still have several decades to go before retirement. It is possible to accumulate a substantial pension pot even in a shorter period, especially if a higher contribution rate is used,” Petter said.

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