OREANDA-NEWS. July 14, 2014. At the end of 2013, approximately 22,000 old-age pensioners were entitled to disbursements from the second pillar, but applications for the disbursements were submitted by 16,388 people; that is, a quarter of the people who had reached the age of retirement pension continued working and saving for the second pillar.

Based on the average indicators, pension-age people have accumulated more than EUR 6,600 on their second pillar accounts, with three options for the disbursement of this amount: Second pension pillar contract, funded pension or one-off payout.

“As second pension pillar disbursements are getting more and more topical, three indicators should be kept in mind when signing an insurance contract - guaranteed annual interest rate, surplus profit that the insurance company is obliged to divide in addition to regular pension disbursements, and life expectancy, which is used at the pricing of disbursements,” said Indrek Holst, Chairman of the Management Board of SEB Elu- ja Pensionikindlustus.

According to Holst, the current second pillar pensioners have only accumulated assets in the period of 10 years instead of the regular 30-40, which is why the effect of the second pillar on average retirement pension is rather modest. “In 2013, the size of a second pillar pension contract signed with an insurance company amounted to an average of EUR 47 per month (a year earlier, EUR 44), funded pension EUR 33 per month, and average one-off payout to EUR 927,” said Holst.

If the person joined the second pillar in 2002, continued contributions in the period of 2010-2011 and earned average wages the whole time, the average rate of return on their assets was the average of all funds, and if they retired in 2014, the size of their pension assets would amount to EUR 6,651.

“Of course, in the future, these proportions will change. If we presume that a man who has saved extra pension money since the establishment of the second pillar in 2002 will retire in 2037, he will have saved EUR 60,000 if he earned average wages,” Holst noted.

Year after year the number of people increases who have accumulated more than 50 times the national pension rate on their account, that is, more than EUR 7,449, and who sign a life insurance contract based on which, the company obliges to make pension contributions until the death of the person who signed the contract. Last year, pension contracts were signed with an insurance company by 12.6 per cent of the recipients of second pillar disbursements. Half of the people who currently receive disbursements from the second pillar have signed a funded pension contract and the value of the units accumulated on their pension account remains between EUR 1489.8 and 7,449. Of them, 36.4 per cent have received a one-off payment from the pension fund, so the value of the units on their pension account is less than EUR 1489.8.

In total, there are almost 656,000 people in Estonia who have joined the second pension pillar, of whom more than 148,000 are saving for their pension at SEB. As at the end of last year, there were approximately 303,000 old-age pensioners in Estonia and if the current birth rate persists, the number of people in Estonia aged over 65 will reach 25 per cent by 2050 from the current 18 per cent.