74 per cent of people collecting pensions intend to continue with contributions into the II pillar
As a part of the package of economic measures intended to mitigate the effect of the coronavirus crisis, the State will suspend contributions made into the II pension pillar on account of social tax (4%) from 1 July 2020 to 31 August 2021. People born between 1942 and 1960 are an exception – the contributions made by the State into the II pension pillar on account of social tax will continue as normal. However, they will get the opportunity to suspend their II pillar contributions by submitting a corresponding application in October 2020.
“SEB researched the plans of people collecting pensions regarding the suspension of II pillar contributions by the State, and the survey confirmed that people primarily consider ensuring their future financial stability as their own responsibility. Just 26% of respondents currently plan to suspend their own contributions into the II pillar. Most of them justify their plan by the necessity to use the remaining 2% of their salary to cover everyday expenses. A quarter of those planning to suspend contributions do not wish to take an investment risk during a period of economic difficulty, and roughly the same amount wish to save this money as a money buffer. Just 11% of those people intending to suspend contributions plan to use alternative investment opportunities instead of the II pillar,” clarifies the head of the Estonian branch of SEB Elu- ja pensionikindlustus Triin Messimas with regard to the results of the survey.
According to Messimas, a person should have an alternative solution lined up for collecting their pension assets in the event suspending their II pension pillar contributions. If there is no alternative plan, one should certainly continue with their contributions. SEB analysed the effect of suspending contributions into the II pillar during the previous financial crisis, and the results of that analysis also showed that it is recommended for a person collecting a pension to continue making contributions, since this guarantees a discernibly larger pension income for the investor in the future.
SEB customer survey showed that 74% of respondents intend to continue their contributions into the II pension pillar. The highest proportion of people doubting the purpose of continuing their contributions into the II pension pillar spoke Russian as their mother tongue (35%). The SEB customer survey was conducted in May 2020. 904 customers responded to the survey.
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