Nearly 160 Estonian companies are making payments into their employees’ pension pillars

In 2015, there were only 157 Estonian companies contributing to the 3rd pension pillar of their employees, meaning that an additional contribution was being made to the accumulation of pension assets for 1,899 employees. The SEB Retirement Readiness Survey revealed that nearly one-third of employed people would like their employer to support the securing of their retirement by concluding an employer’s pension contract with them.

“Interest towards employer’s pension solutions is strongest in the IT sector, where competition in the hiring of specialists is quite intense, with companies placing much greater emphasis on their employee motivation packages. In addition, there are companies whose parent undertakings in Europe offer an employer pension and who consider it natural to also do so in Estonia. As a whole, the number of companies contributing to their employee’s 3rd pension pillar has grown from year to year, although the growth trend has been modest,” said Indrek Holst, Chairman of the Management Board, SEB Elu- ja pensionikindlustus.

Employer’s pension provides a significant contribution to the future financial security of employees.

The survey indicated that over one-half of the residents of Estonia consider saving for their retirement to be reasonable, although the actual level of saving activity is low and only 27% are saving for their pension in one form or another. At the same time, only 14% are saving on a regular basis, contributing an average of EUR 100 per month to their 3rd pension pillar fund or savings account.

“People frequently find it difficult to imagine the distant future, and have even less of a desire to invest in it. Taking a look at employer’s pension payment statistics, a positive impact can be seen on the length of the savings period as well as the amount of contributions. While the average person begins to set aside additional savings for their retirement shortly before their 50th birthday, the savings period for those having joined the employer’s pension is seven years longer, on average, meaning that the process of saving begins earlier. This means that the amount saved and later paid out during retirement is greater. On average, contributions by those who have joined an employer’s pension program are bigger than those who are saving in the 3rd pillar without a contribution from their employer,” explained Holst.

According to the amendment to §13 of the Income Tax Act, which took effect on 1 January 2012, the contributions made by the company, that is, the employer, to the 3rd pillar pension solution of the employee, are exempt from income tax. Income tax exempt contributions can be made to the extent of 15% of the total taxable disbursements made to the employee during a calendar year, not exceeding EUR 6,000 annually. Previously, a factor restricting the use of this opportunity was the fact that according to the Income Tax Act, an employer’s contribution to the employee’s 3rd pillar was treated as a fringe benefit.

* The data used is based on statistics released at the end of 2015 on the state old-age pension, mandatory funded pension and voluntary funded pension by the Ministry of Finance, and the Pension Readiness Index Survey conducted by SEB and market-research company TNS at the end of 2015 in all three of the Baltic States, in which 1700 private persons participated.

For more information:

Maarja Gavronski
Project Manager for Communication
Marketing and Communications Division
SEB Pank

Phone +372 665 5270
Mobile +372 5656 5785
Address Tornimäe 2, 15010 Tallinn
E-mail maarja.gavronski@seb.ee 
www.seb.ee

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