OREANDA-NEWS. August 07, 2012. SEB is the first large enterprise in Estonia to start paying employer’s pension to its employees. The employer’s pension system, aimed at all employees, is currently used by about a dozen small companies in addition to SEB, but it could be a regular part of the employment contract at every company, reported the press-centre of SEB.

“So far, within the SEB Group, Estonia had been one of the few countries where an employer’s pension system was not made available to employees. The main reason for this was the unfavourable tax environment of Estonia. Now, tax regulations have been improved and this allowed us to start making employer’s pension contributions to our employees. According to the analysis by SEB, the deficit of the current generation’s pension assets at the moment of retiring, that is, in 2040, is almost EUR 18 billion. Adding the contribution of employers to the accumulation of pension allows this deficiency to be reduced,” said Riho Unt, Chairman of the Management Board at SEB.

“There are various options for implementing employer’s pension in a company. SEB has chosen the solution in which the company pays an additional 2 per cent of the employee’s gross wages to the 3rd pension pillar of the employee if the employee also contributes 2 per cent from their wages. Thus, joining the employer’s pension is voluntary for the employee and the accumulated assets will belong to the employee after the expiry of the employment contract as well. In the first month, almost 400 employees of SEB joined the new pension system. In the future, SEB aims to improve and develop its employer’s pension programme. The major goal is and will remain the same – to contribute together with the employee to ensuring their economic well-being in the future. If any Estonian employer wishes to do something similar for their employees, we will be glad to share our experience,” May-Liis Veinjarv, Assistant Director of the Personnel and Training Division at SEB, added. Employers can ask for advice by sending an e-mail to the address tooandjapension@seb.ee.

According to the amendment to section 13 of the Income Tax Act, which took effect on 1 January 2012, the contributions made by the company, that is, the employer, to the 3rd pillar pension solution of the employee, are exempt from income tax. Income tax exempt contributions can be made to the extent of 15% of the total taxable disbursements made to the employee during a calendar year, which does not exceed EUR 6000 annually. Earlier, a factor restricting the use of this opportunity was the fact that according to the Income Tax Act, an employer’s contribution to the employee’s 3rd pillar was treated as a fringe benefit.