More about the II pillar

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  • Fees of all our pension funds are favourable.
  • We make sure you save in a fund matching your age. With the right fund, your pension can grow sufficiently, and as the retirement age gets closer, the risks will be lower.
  • Most Estonians save for their pension with us.
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Important to know about the II pillar pension:

  1. The employee’s wages are subject to social tax that is paid at a rate of 33%, of which 13% is directed to health insurance and 20% to the state pension (I pillar), which is immediately paid to the current pensioners. Depending on the number of employees and pensioners, the amount of the payable state pension will change.
  2. When you join the II pension pillar, the state pension will amount to 16% and 4% to insure your personal future, plus 2% of your wages. This part is not paid to the current pensioners, but only to you when you reach retirement age. Therefore, the purpose of the II pillar pension is to compensate for the future deficit resulting from the reduction of the I pillar pension. As time goes on, the II pillar will have a positive impact on your retirement income.
  3. The pension is automatically added to the II pillar in the form of monthly payments and based on your remuneration.
  4. Find a suitable fund to save in the II pillar.

    • Higher risk funds (K1990–1999, K100, K60, K30) with more equity investments. There may be greater fluctuations with regard to equity investments, making them ideal for young savers, whose saving period is long and temporary fluctuations do not affect the saver. This way you can earn higher returns.
    • Lower risk funds (K10) with more bonds. Bond investments are generally more stable and have lower risk. These are more suitable for an elderly saver to preserve the pension assets accumulated before retirement.
  5. Those who invest in Swedbank’s actively managed funds (K4; K3; K2; K1) receive a notification when it is time for them to change fund. When you use the Life Cycle Fund, it is not necessary to change funds since its risk profile becomes more conservative with age. This means that you can stay in one fund for the entire saving period.
  6. Besides performance, always pay attention to fees. The fees of Swedbank’s pension funds are the best in Estonia in terms of actively managed funds (K4; K3; K2; K1).
Recommendation! It serves to keep in mind that the 1st and 2nd pillar pension may not be enough as they usually constitute about 40% of the salary before retirement. A good opportunity to increase your savings is to use the 3rd pension pillar with an income tax rebate.

The process of saving for retirement takes decades. During this time, financial markets both rise and fall. Regular investment is the best way to combat market fluctuations. Within Pillar II, the pension fund investment units are bought both from the bottom of the market, where prices are low, and when the financial markets are doing well and prices are high. For example, if you invest only when prices are high, the fund’s long-term return will fall below the market average. As it is difficult to predict the behaviour of financial markets, even in a few years’ time, we recommend continuing with regular monthly contributions to Pillar II.

The state suspends 4% contributions made at the expense of social tax as of 1 July 2020. An additional 4% of the June remuneration, which will be paid at the end of June, is added to Pillar II. However, if the June remuneration is paid at the beginning of July, the state will no longer transfer 4% to Pillar II. For those born until 1960, the collection continues in the same way as before. The state will continue to make contributions to their pension fund as before.

You do not have to do anything in this regard, as 2% of your remuneration will be transferred to your pension fund even after 1 July.

For those who continue to contribute 2% of their remuneration during the suspension of payments, the state will compensate for its temporary suspension of payments during the period of 2023–2024. The state retrospectively transfers such an amount to the pension fund that it did not pay during the period of suspension of payments. Therefore, the state adds twice the amount paid by the person for the period of suspension of state payments. In addition, the state also compensates for the average return of Estonian Pillar II pension funds between 1 July 2020 and 31 December 2022. If the return is negative during this period, the state will only compensate for the contributions. The compensation process is automatic and you do not have to do anything yourself.

Important! Those born in 1960 and earlier, who decide to temporarily suspend contributions in October, will not receive the compensation described later, as the state will not suspend its contributions from July.

To this end, you must submit a relevant application during the month of October 2020.

When paying its compensation, the state takes into account the amount that the person paid into Pillar II during the period of suspension of payments. If, for example, there are a few months left in this period for which you received no remuneration, a smaller amount will be transferred to your Pillar II. The logic of state compensation does not change in this regard: the state still compensates twice the amount paid to Pillar II at the expense of your remuneration.

The temporary suspension of payments does not apply to the so-called parental pension contributions. These will continue to be transferred to Pillar II until the child reaches the age of three.

No, this application cannot be changed or cancelled later. If you have already applied, the contributions from your remuneration will be suspended in any case from December 2020.

More information

Read more in detail about the temporary suspension of the Pillar II payments in the materials prepared by the Ministry of Finance (available only in Estonian and Russian).

Joining the 2nd pillar is mandatory for everyone born after 1 January 1983 on behalf of whom social tax is paid by the employer.

You should choose a pension fund yourself today, otherwise lots will be drawn to determine your 2nd pillar fund.

Until 31 October 2010 those born from 1980-1982 could join the mandatory pension fund. If joining the mandatory pension fund is no longer possible, we recommend that you choose the most suitable method of saving for your retirement among 3rd pillar solutions and use other saving opportunities.

In accordance with the Funded Pensions Act, mandatory funded pension payments can be obtained upon reaching the old-age pension age. Note: Old-age pensions under favourable conditions, early retirement pensions and other such pensions do not entitle you to receive mandatory funded pension payments.

The manner of payment depends on how many national pension rates* equals the value of the units in the pension account. The Estonian Central Register of Securities makes payments (except in the case of an insurance contract) from the 16th-20th of the month determined by the frequency of payments.

There are four ways of receiving mandatory funded pension payments:

  • Single payment. If the total value of units in the pension account is less than 10 x the national pension rate, the person may receive it in a single payment. It may be possible to enter into a pension contract instead, but the insurance company may refuse to enter into one.
  • Funded pension or Fixed- term Pension contract. If the total value of the units is 10-50 x the national pension rate, the money can be received in regular payments directly from the pension fund. It may be possible to enter into a pension contract instead, but the insurance company may refuse to enter into one.
  • Pension contract. If the total value of the units exceeds 50 x the national pension rate, the person must enter into a pension contract with an insurance company which will then calculate the amount payable to the person until the end of his or her lifetime, using the annuity calculation formula. If the total value of the units exceeds 700 x the national pension rate, there are several possibilities: the pension contract may be entered into for the total value of the units, or the units that exceed 700 x the national pension rate may be left in the pension account and it is possible to take out a funded pension to receive payments on those units, take the exceeding amount out as a single payment or enter into another pension contract.

Applications for receiving payments (single payment or funded pension) may be submitted at a branch or online at in the web section.

You have to contact an insurance company in order to enter into a pension contract.

Insurance companies

If you continue working and submit an application to receive payments, the calculation of payments from your gross salary to the mandatory funded pension shall be terminated on 31 December of the year the first redemption of units was made.

You can obtain further information about your pension assets and options for receiving payments by calling our investment support on 6 131 606.

*The national pension rate is the amount calculated on the basis of an index approved annually by the government, which is used for calculating pensions for people not entitled to receive the state old-age pension. The national pension rate established for 2020 is €221,63. This rate is effective until 31 March 2021, after which a new national pension rate will be established.

For the succession of 2nd pillar pension fund units, an application and certificate of succession must be submitted.

The successor has the right, once within one year of the issuing of the succession certificate, to submit an application regarding all units forming part of an inheritance to redeem or transfer them to the successor’s pension account.

Income tax is imposed on payments to a current account.

If the successor has not submitted an application for the redemption or transfer of the units by the specified deadline, the successor may, within 10 years of the opening of the succession, only demand that all units inherited be transferred to the successor’s pension account.

A successor who has not joined a 2nd pillar pension has the right to request the redemption of units once within 10 years of the opening of the succession.

From 1 June 2009 until 31 December 2010 the state contributions to the 2nd pillar pension funds were suspended. Those who wanted to continue personal contribution payments were able to submit an application to continue with contributions from 2010. In 2013 it was possible to submit an application to increase contribution. The first number shows personal and the second state contribution.

Schedule Application submitted Application not submitted
01.06.2009 – 31.12.2009 0% + 0% 0% + 0%
01.10 – 30.11.2009 Submission of application to continue making contributions
2010 2% + 0% 0% + 0%
2011 2% + 2% 1% + 2%
2012–2013 2% + 4% 2% + 4%
15.05 – 15.09.2013 Submission of application to increase contributions
2014 – 2017 3% + 6% (Application to increase contributions not submitted: 2% + 6%) 3% + 6% (Application to increase contributions not submitted: 2% + 4%)
2018 2% + 4% 2% + 4%
Note: People born in or before 1954 who submitted an application to continue making contributions to the 2nd pillar pension in 2009 could not submit an application in 2013 to increase contributions because from 2010 the state contributions to their pension fund continued as usual.

Which fund of the II pillar fund is the most suitable for you?

Life Cycle Fund


Actively managed funds

K100, K60, K30 and K10

Fund invests in Estonia and other Baltic States, among others
Monthly overviews of fund investments and results
Fund is actively managed
Fund invests mainly in indexes
Risk profile of the fund changes automatically with time

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Fees of Swedbank pension funds are favourable

Pension fund Current fees
K10 0,37%
K30 0,65%
K60 0,67%
K100 0,70%
K1990–1999 0,47%

Fees as of 30 June 2020. You can view the current fees of all funds provided in Estonia on the website at