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Payouts from the second pension pillar

According to law, people have the right to start withdrawing the money they have saved in the second pension pillar when they attain retirement age.

The national pension rate is calculated on the basis of the index approved by the government. The national pension rate as of 1 April 2012 is 134,10 euros.

One-off payout
Funded pension
Pension contract
Taxation of payouts from the second pension pillar

One-off payout

If the amount of money saved remains below ten times the national pension rate, the unit-holder can withdraw the money saved in their pension funds as a one-off payment. People who wish to do so have to fill in a one-off payout application in the Internet Bank or visit a branch of the bank.
You have to be certain that this is what you want to do, as the application cannot be changed or withdrawn.

• The payout is transferred to the current account indicated in your application in the second half of the month following the month when the application was submitted.
• You cannot rejoin the second pension pillar after the one-off payout has been made.

Funded pension

You can withdraw the money you have saved in the second pension pillar in regular payouts from the pension fund if the amount of your pension savings is up to 50 times the national pension rate.

Submit an application for receipt of regular payouts in the Internet Bank or at a branch if you would like to receive a funded pension.

In addition to providing the number of your current account, please also select the frequency of your pension payments and the length of the period over which you wish to receive them. The minimum period depends on your age and is determined in the Funded Pensions Act.

The amount of a pension payout depends on the period and frequency of payouts and the number of units accumulated.

Changing your funded pension
You can change the terms and conditions of your pension payouts during the time that payouts are made from your funded pension, such as:

• the current account to which the money is paid;
• the duration of payouts in years;
• the frequency of payouts; and
• the use of a unit limit.
   

Any changes you make will take effect at the start of the new pension year. You can also stop payouts from your funded pension. This means that the units will stay in the pension fund until you make a new decision.

Pension contract

Pension contract is the life insurance product on the basis of which annuity payouts are made to pensioners. This means that the agreed pension payments are guaranteed to you until the end of your life.
Pension contract is meant for people who have saved more than 50 times the national pension rate in their funds.

The frequency that can be selected for the payouts is either a month or a quarter.

Guarantee period is an additional option offered by the pension contract. If the person who entered into the pension contract dies during the guarantee period, the beneficiary (or beneficiaries) specified in the pension contract will receive pension payments until the end of the guarantee period. No limitations are applied to the length of the guarantee period: you can select the period when you enter into the contract.

• Policyholders can withdraw from the contract within 14 days or they can change their decisions as necessary.
• Pension contracts can be cancelled after three years have passed from the time they were entered into. The insurer will calculate the surrender value of the insurance contract when a pension contract is cancelled. The surrender value is not paid out to the policyholder but transferred to the insurer who entered into the contract as an insurance premium for the new pension contract.
   

Register for a free consultation or call us on 665 5100 if you have any questions.

Taxation of payouts from the second pension pillar

Pension payouts are subject to income tax according to the legislation of the Republic of Estonia. Income tax is calculated on the basis of the tax-exempt rate applicable to individuals, which is monitored by the Estonian Central Securities Depository.
The tax-exempt income of a person who has attained retirement age consists of two parts:

• general tax-exempt limit, 1,728 euros per year. A pensioner who does not work and who has not earned any other taxable income in the calendar year has the right to deduct both the general and additional tax-exempt income from their first and second pillar pensions before income tax is withheld. You must submit a written application to your local Pension Board in order to deduct the general tax-exempt income.
• additional tax-exempt limit is subtracted from the pension before income tax is withheld. The sum of payouts from the first and second pillars is tax-exempt to the extent of 2304 euros per calendar year. These two tax-exempt rates are calculated as one lump sum per year that is divided equally over 12 months.
   

The person who makes the pension payout will send a query about the tax-exempt rate applicable to the client to the Estonian Central Securities Depository before making the payout (for example, information queries about SEB clients are made by SEB Life and Pension Insurance). The Estonian Central Securities Depository uses the sum of the tax-exempt rates for previous months as the client’s tax-exempt rate if the client has not earned any taxable income in the calendar year.
The tax-exempt rate is not calculated if the client is not a resident of the Republic of Estonia and pays their taxes in another country. The person who makes the payouts obtains the relevant information from the Estonian Central Securities Depository and the tax-exempt rate for such persons equals zero.