Estonian pension reform putting system at risk?

The parliament in Tallinn is expected to approve a pension reform today, Wednesday: The so-called second pillar, the private pension back-up fund, is to be voluntary in future. Until now all employees had to pay two percent of their salary into savings accounts, with the state adding another four percent. Under the reform the money on these accounts can now be withdrawn. Estonia's press is highly critical.

Open/close all quotes
Eesti Ekspress (EE) /

False promises of freedom

Eesti Ekspress takes a very critical view of the plan:

“A great deal of verbiage is being thrown around on this reform, the most hollow of which is the refrain: 'We are giving citizens their control over their money back, the freedom of citizens is growing'. ... We are taking from the greedy and powerful state and giving to the free citizen!' But actually the reverse is true. The reform means that the role and responsibility of the state in providing for people's old age grows. If you have fewer and fewer taxpayers overall and an increasing number of pensioners with no savings, the latter will be fed by the state alone. So the dependence on the state becomes total.”

Õhtuleht (EE) /

Pension funds could implode

Õhtuleht warns of a domino effect:

“There has been little discussion of how to protect the interests of those who want to keep their second pension pillar. To put it simply: will there be a bank run or not? In turbulent times, people have always tried to rescue their savings by withdrawing all their money from the banking system, causing the system to collapse. If money in large amounts is suddenly taken out of the second pension pillar, what will the pension funds do? To free up money for payouts, they will have to sell their investments quickly, which will reduce the value of their shares. ... The fear of losing their pension savings could also prompt people who hadn't actually planned to take their money out of the second pillar.”