Voluntary Supplementary Pension Scheme

Vabatahtlik kogumispension

Coverage

Voluntary participation

Persons with taxable income, residing in Estonia.

Financing

General finances

Funded scheme financed from voluntary insurance contributions and capital revenues.

Contribution payments

Individual insurance: insured persons can either conclude a pension insurance contract with a life insurance company or provide contribution payments to a voluntary pension fund. Its amount can be decided upon individually.

State support & incentivising strategies

Participants receiving parental benefits for raising a child get an additional 1% of the amount of the benefit for each child born (after 2013) from the state budget as a subsidy to their individual accounts.
General income tax exemption for acquisition of shares of voluntary pension funds that do not exceed 15% of the gross earnings of the employee or EUR 6,000 in total.

Administration

The purchased shares of the pension fund are registered to the pension account at the ‘Estonian Pension Register’.
Pension plan providers manage pension funds.
Companies who deal with life insurance and to whom an activity licence for pension insurance has been issued conclude insurance contracts regarding the mandatory terms set forth in the legislation.
The ‘Financial Supervisory Authority’ regulates, licenses and oversees the pension schemes.

Qualifying Conditions

Based on the age provided in the contract but not before age 55.
Early obtainment of pension benefit: available in case of work incapacity.

Benefits

Pension benefits

Accumulated capital through contribution payments and investment yields, minus administrative costs and costs/fees of pension provider.
Paid periodically at least once every three months until the death of the policyholder, unless otherwise prescribed in the contract.
The accumulated capital in the individual accounts is inheritable.

Taxation and social security contributions

Pension payments are subject to income tax; tax rates vary depending on the age of the person claiming the benefits for the first time and the time passed between the conclusion of the contract and the payout phase.¹
Pension benefits are not subject to social security contributions.

Coverage

Financing

Administration

Qualifying Conditions

Benefits

Voluntary participation

Persons with taxable income, residing in Estonia.

General finances

Funded scheme financed from voluntary insurance contributions and capital revenues.

Contribution payments

Individual insurance: insured persons can either conclude a pension insurance contract with a life insurance company or provide contribution payments to a voluntary pension fund. Its amount can be decided upon individually.

State support & incentivising strategies

Participants receiving parental benefits for raising a child get an additional 1% of the amount of the benefit for each child born (after 2013) from the state budget as a subsidy to their individual accounts.
General income tax exemption for acquisition of shares of voluntary pension funds that do not exceed 15% of the gross earnings of the employee or EUR 6,000 in total.

The purchased shares of the pension fund are registered to the pension account at the ‘Estonian Pension Register’.
Pension plan providers manage pension funds.
Companies who deal with life insurance and to whom an activity licence for pension insurance has been issued conclude insurance contracts regarding the mandatory terms set forth in the legislation.
The ‘Financial Supervisory Authority’ regulates, licenses and oversees the pension schemes.

Based on the age provided in the contract but not before age 55.
Early obtainment of pension benefit: available in case of work incapacity.

Pension benefits

Accumulated capital through contribution payments and investment yields, minus administrative costs and costs/fees of pension provider.
Paid periodically at least once every three months until the death of the policyholder, unless otherwise prescribed in the contract.
The accumulated capital in the individual accounts is inheritable.

Taxation and social security contributions

Pension payments are subject to income tax; tax rates vary depending on the age of the person claiming the benefits for the first time and the time passed between the conclusion of the contract and the payout phase.¹
Pension benefits are not subject to social security contributions.

¹ Before age 55: 20% income tax on payments; 10% income tax on payments if a person has become fully and permanently incapable of work; income tax is not charged on lifetime annuity from an insurance company paid monthly or quarterly if a person has become fully and permanently incapable of work; age 55 or after: 20% income tax on payments if less than 5 years have passed since the conclusion of the contract/first acquisition of redeemable shares; 10% income tax on single and fixed-term payments of tax if more than 5 years have passed since the conclusion of the contract/first acquisition of redeemable shares; lifetime annuities are not subject to tax if more than 5 years have passed since the conclusion of the contract/first acquisition of redeemable shares.

Legal Basis: Funded Pensions Act (Kogumispensionide seadus); Income Tax Act (Tulumaksuseadus).