Zusätzliche Altersvorsorge (obligatorisch)
2004: Funded Pensions Act; regulates coverage, contributions and benefits.
2002: Guarantee Fund Act; provides for the establishment of the Guarantee Fund to compensate, among other consumers of financial services, members of mandatory pension funds for any losses due to violations of legal requirements, fraud or mismanagement that cannot be covered by the reserves or assets of the Pension Management Company.
2000: Securities Register Maintenance Act; defines the tasks of the Pensionikeskus and regulates the procedure for the registration of pension fund units in individual pension accounts.
Assets are accumulated according to the defined contribution principle and must be used at retirement to purchase a life annuity.
Voluntary contributions to mandatory pension funds are not allowed. Members may, however, contribute to a voluntary supplementary pension fund, usually established by the same Pension Management Company that manages the mandatory pension fund.
The pension system in Estonia consists of three pillars:
- the 1st pillar: the state social insurance pension;
- the 2nd pillar: the mandatory funded pension;
- the 3rd pillar: the voluntary supplementary funded pension.
Information on the state pension and the supplementary funded pension is not provided in the following sections.
PMCs must be limited companies with headquarters in Estonia and a minimum share capital of the equivalent to EUR 1 million.
In order to establish and manage mandatory pension funds, a PMC must apply to the Financial Supervisory Authority (FSA) for an operating licence. An operating licence for the management of mandatory pension funds also authorises the management of voluntary pension funds, other investment funds and the provision of securities portfolio management services.
A PMC may establish two or more mandatory pension funds, provided that the investment policies of the funds differ significantly. At least one fund must be invested conservatively (see section on Asset management).
The following documents and information must, among others, be attached to the application for an operating licence:
- the articles of association of the PMC (see below);
- information on the shareholders of the PMC and, in particular, on persons who own qualifying holdings (legally defined as 10% of share capital or number of votes, or having significant influence on decisions);
- information on the members of the management and supervisory board of the PMC (e.g. education or professional experience);
- information on the fund manager, the compliance officer and the auditor;
- a business plan (see below);
- the internal rules (see section Protection of rights, Financial and technical requirements / reporting).
The articles of association of a PMC must define the powers of the management and the supervisory board and must, among other issues, regulate:
- the establishment of pension funds and other investment funds;
- the establishment of, and changes to, the pension fund rules;
- the conclusion of, and changes to, the contract with a custodian;
- the appointment of fund managers.
Amendments to the articles of association are subject to the approval of the FSA, which must only be granted where they are not detrimental to the interests of members.
The business plan must be for a period of three years and contain, among other information, descriptions of and/or forecasts of:
- the market value and net asset value and the rate of return on the assets of the pension funds;
- the investment policy and structure of the pension funds;
- the management fees of the pension funds.
A company already operating as an investment fund management company must also submit the most recent yearly and half-yearly reports of the investment funds managed and an activity report that must include information on:
- the structure, value and fees of the investment funds managed by the PMC;
- the management structure and technical capacities of the PMC.
PMCs must establish pension fund rules regulating, among other issues, the purchase and redemption of units and the procedure for gradual withdrawals from the fund, and must apply to the FSA for their approval and registration. Amendments to the pension fund rules are subject to the approval of the FSA, which must only be granted where they are not detrimental to the interests of members.
Managers of PMCs must comply with certain qualification requirements (e.g. academic education) and must have a sound reputation. Persons who have been responsible for the bankruptcy of a company or have otherwise shown their incapacity to manage a company may not be managers of PMCs.
Upon appointment, managers of PMCs must submit evidence of their education and professional experience to the FSA, which may refuse to approve the appointment.
Life insurance companies with a share capital equivalent to EUR 3 million or more that have been licensed by the FSA to operate in the area of mandatory funded pensions provide benefits to retirees (see section Retirement benefits, Benefit structure /formula).
Enforcement of affiliation
Sources of funds
Other sources of funds
Methods of Financing
Preservation, portability, transferability
Benefit qualifying conditions
Withdrawal of funds before retirement
Benefit structure / formula
Benefit qualifying conditions
Benefit qualifying conditions
Protection of Assets
Financial and Technical Requirements / Reporting
Standards for service providers
Winding up / Merger and acquisition
Bankruptcy: Insolvency Insurance / Compensation Fund
Disclosure of information / Individual action
Taxation of member contributions
Taxation of employer contributions
Taxation of investment income
Taxation of benefits
The FSA may revoke the operating licence for establishing and managing mandatory pension funds if the respective PMC violates legal requirements, the pension fund rules or the interests of members, if the company has submitted wrong information or manipulated documents, or if it does not comply with an order of the FSA. It may also request the replacement of a manager of a PMC, a fund manager of a pension fund or a custodian. The FSA is authorized to issue orders to PMCs and to carry out on-site inspections.
Tel.: (+372) 6 680 500
Fax: (+372) 6 680 501
Pensionikeskus opens pension accounts for members of the mandatory pension funds system, in which the pension fund units bought by means of contributions are registered. The Pensionikeskus also maintains an account in the Bank of Estonia to which all contributions collected by the Tax Board are transferred and are then used to purchase units of the respective pension funds.
A fee, the upper limit of which is fixed by the Ministry of Finance, is charged by Pensionikeskus to all mandatory pension funds and is equal to a percentage of the asset value of the funds.
Pensionikeskus is supervised by the Ministry of Finance and the FSA to ensure that it carries out its functions in compliance with legal requirements. The supervisory authority may carry out on-site inspections of the Pensionikeskus.
The Pensionikeskus must immediately notify the supervisory authority of any event or circumstance that materially affects its activities or financial situation. It must compensate for any damage caused by non-compliance with its obligations and must insure against liabilities arising from such actions with an insurance company. The conditions of this insurance contract must be approved by the Minister of Finance.
If claims for damages cannot fully be compensated by the Pensionikeskus, and are not fully covered through the insurance contract, the state is liable to compensate for the damages. It may have recourse to the Pensionikeskus to recover any monies paid.
Reg. nr. 14282597
Maakri 19, Tallinn 10145
Tel.: (+372) 640 8806
Fax: (+372) 640 8801
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