Pensions in Estonia

Each EU country contributes to a person’s pension according to the amount of time they have worked in that country. Work in Estonia is added to the pensionable service from other countries if a person has worked in Estonia for at least one year. Estonia contributes to pensions for the time worked in Estonia.

The Estonian pension system is based on three pillars:

• I pillar or state pension. This is the responsibility of the Social Insurance Board (Est Sotsiaalkindlustusamet).
• II pillar or mandatory funded pension. This is the responsibility of theThe State Pension Center (Est Pensionikeskus).
• III pillar or supplementary funded pension. This is the responsibility of several fund managers (often banks) and insurance companies.

The state pension is appointed to permanent residents of Estonia and persons living in Estonia on the basis of a temporary residence permit. The pension is divided into two:

• Old-age pension - a person is entitled to it after they have become 63 (65) years old and their length of employment in Estonia is at least 15 years.*
• national pension - paid to the persons of retirement age who do not have sufficient length of employment (15 years), a precondition being that the person has lived in Estonia for at least 5 years before applying for the pension.

*The right to receive the state old age pension is valid also if a person has pensionable service of at least 15 years in other EU member countries. Work in another EU member country or in Norway, Liechtenstein, Iceland or Switzerland is taken into account if the person has worked in one of those countries for at least one year and has the necessary documents to prove it (i.e. employment contract).

In addition to the state pension, the Estonian pension scheme also includes a funded pension scheme (pillar II) and a voluntary supplementary pension scheme (pillar III).

Joining the funded pension scheme is optional for persons born before 1983 and mandatory for persons born on 1 January 1983 and later*. A person pays 2% her/himself for the funded pension (deductible from the gross salary by the employer), and the state adds 4% from the social tax paid by the person. Almost all such funds are associated with larger banks in Estonia (Pensionikeskus - list of mandatory pension funds).

*NB! From 1 January 2021, everybody can submit an application for an exemption from making contributions to the pillar II, if they do not wish to make funded pension payments or save money there. Please read more about the pension reform 2021 below.

Joining the supplementary funded pension scheme is voluntary. The amount of the contribution can be determined individually, as well as the period of receiving payments from the supplementary funded pension. Income tax from payments for the supplementary funded pension is refunded (see the chapter on taxation). It is also possible to continue payments to the supplementary funded pension from another country. Supplementarty pension funds are associated with larger banks in Estonia (Pensionikeskus - list of supplementary pension funds). It is also possible to continue to make payments to supplementary pension funds that you have established elsewhere while residing in Estonia.

Pension Reform 2021

In 2021, new rules came into force, concerning the II pillar giving persons more freedom as well as more responsibility for securing an adequate income for their retirement:

• Fundraising in the II pillar is voluntary;
• Continuously, all adults can join the II pillar if they have not joined yet, but wish to do so.
• Young people join the second pillar automatically, but they have a chance to rethink and submit (periodically) an application for exemption from contributions (read more here), with a minimum of 10 years rule - one has a right to resume contributions to the pillar funds only after 10 years from the termination date.
• Next to pension funds, a pension investment account option became available, where one can invest second-pillar money themselves.
• The money collected in the II pillar can be withdrawn already at the time of collecting the pension (read more here).
• When you reach retirement age, it is up to you to decide how to use the money raised.
• Decisions do not have to be rushed, new opportunities can be used all the time.

The general retirement age for both men and women was 63 years before 1 January 2017. As of 1 January 2017 the retirement age started to rise gradually and will reach 65 years by 2026. The retirement age increases accoding to year of birth. 

Check your pension

You can check the status of your pension funds in your internet banking system.

See also:

State Portal www.eesti.ee - State Pensions

Estonian Ministry of Social Affairs - Social insurance and pension

Estonian Social Insurance Board - Pension, types of pension and benefits

Pensionikeskus - Estonian pension system

www.kalkulaator.ee/en/salary-calculator Salary/Wage and Tax Calculator