Thursday, January 29, 2009

Reform Party plans to stop payments into second pension pillar

To save the several billions of Estonian Kroons needed to balance the budget, the Reform Party aims to stop payments into second pension pillar.

Currently, the 1st pillar is compulsory and the 2nd becomes obligatory: once you have joined, you cannot leave. For the 2nd pillar, you pay 2% of your salary to which the State adds 4%. The 3rd pillar is voluntary.

The idea is to stop the payment of the 4% to the 2nd pillar at least for one year to save EEK 2.4 billion.

Jürgen Ligi, a member of Reform Party and the chairperson of Parliament’s finance committee said that this idea has been on the table: “I don’t support changing the system, but temporarily diminishing the payment may be reasonable when joining euro is the goal,” he said. Kristen Michal, the general secretary of Reform Party said the idea came from economic people.

Once again, a very controversed idea that will mainly affect the poorest Estonian pensioners. If such an important change is made unilaterally, then it should be possible for someone contributing to the 2nd pillar to get out of it, take his money back and invest it freely.

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