OREANDA-NEWS. February 22, 2012. The tax system as amended at the beginning of the year now allows employers, in addition to paying wages, to contribute into the employees’ third pension pillar as well, without it being treated as a fringe benefit, reported the press-centre of SEB.

SEB Pank has created the e-mail address tooandjapension@seb.ee, where clients can write and ask for advice in case of any questions.

“The law that was changed at the beginning of the year will open for the Estonian companies the door that has been in use in the western world for decades already – the chance to better ensure the employee's future with the employer. The motivation of a company for contributing into an employee’s pension fund may have various reasons – it is an additional measure for increasing the attraction of the employer on the job market, or, a versatile motivational package helps keep the loyalty of employees and decrease staff turnover. The offering of employer’s pension is part of the activities of a company in the field of social responsibility, aiming at managing the social risks of the employees in the future,“ said Indrek Holst, Chairman of the Management Board of SEB Elu- ja pensionikindlustus.

According to the amendment in section 13 of the Income Tax Act, which was enforced on 1 January 2012, the contributions made by a company, i.e., an employer to the third pillar pension fund of an employee are exempt from income tax. Contributions can be made income tax free in the amount of up to 15% of the sum of the payments made to an employee in a calendar year and charged with income tax, which may not exceed 6 000 Euros annually. Earlier, the use of such an option was restricted by the fact that according to the Income Tax Act, the contribution made by an employer to the third pension pillar of an employee was treated as a fringe benefit.

From this year onwards, similarly to paying wages, an employer can also make contributions into the third pension pillar of an employee on the basis of the pension fund or insurance agreement signed by the employer. So, the contributions made by an employer to the pension fund of an employee will be preserved, even if the employee changes employers for any reason.