OREANDA-NEWS. December 22, 2014. According to the results of the pension habits analysis organised by SEB at the end of 2014, a Russian-speaking resident of Estonia saves much less for retirement than his or her Estonian-speaking compatriot.

For example, monthly payments into the third pension pillar differ for Russian- and Estonian-speaking clients by EUR 10, on average, and the accumulated pension assets differ by almost EUR 1000. There is also a notable difference in the choices made by Russian-speaking clients when choosing II pillar strategies, characterised by less readiness to take risks and greater conservatism. For example, among 46–60 year olds, 40% of Russian-speaking people chose the conservative II pillar, while just 30% of Estonians did the same. There are noticeable differences in other age groups too.

Indrek Holst, Chairman of the Management Board, SEB Elu- ja Pensionikindlustus: “The collected data regarding Estonia’s Russian-speaking population speaks volumes, implying that they are much warier when it comes to saving for pension or do not take it seriously in the long term. The most likely reason for the lower saving activity of the Russian population is a lack of information and weak communication.

This all leads to the result where a person does not believe it necessary or right to save additional funds for their pension, which in turn may have a negative impact in the long run on the Russian-speaking population’s quality of life during retirement. In the long run, we may end up facing a situation where one national group is less secure financially than another.”

At the same time, two groups can be clearly distinguished: those who regularly save for pension and those who fail to do so consistently. According to statistics, the assets of Russian-speaking clients who save regularly for pension exceeds the assets of those who do not save regularly – by 165%, i.e. more than one and a half times. Compared with the Estonian-speaking population, which saves for pension either regularly or irregularly, the difference is 37%, i.e. four times less than among the Russian-speaking population. This indicates that people’s discipline to save for the future is fragile, and irregular saving is directly felt in the eventual amount of pension assets saved.

Indrek Holst: “This noticeable difference between the Russian and Estonian speaking population may lead to an issue in the amount of income. At the same time, statistics presents us with another picture: In Ida-Viru County, where more than one half of Estonia’s Russian-speaking population lives, the county salary level is higher than among residents of many other counties. There is a clear trend in Estonia, in which the salaries of the populations of Tartu and Tallinn are 20% higher than salaries in the counties, ranking 1st and 2nd in the average salary table. This year’s average, however, shows that Ida-Viru County’s salary level is the 4th highest nationally. Adding to this the average income of Harju County’s Russian speaking population, the salary level of our chosen target group is well above the Estonian average, meaning that the ability to set aside additional savings should not be hindered by earnings.”

“For SEB, it is paramount to know its clients – their needs and options,” Holst continues. “The results of the survey encourage us to cooperate even more with our Russian speaking clients. Even though the amount of Estonian and Russian language information materials has been equal, perhaps all channels used in society require a thorough review in order to ensure that our messages are more successful in reaching the Russian-speaking citizens of Estonia. We focus on comprehensive advising at SEB, which ensures that our Estonian and Russian speaking clients alike enjoy a smoother and easier financial transition from active work to retirement.”

“The European Code of Social Security provides that the minimum pension should amount to 40% of a citizen’s final income before retiring. In recent years, the ratio of the mean pension to the net earnings in Estonia has stayed close to that figure; however, compared to other EU Member States, it is one of the lowest. The average rate of substitution in the European Union is about 65%, and Estonia still has a long way to go before reaching this figure. Taking into account the basic demographic trends of the country, it is very important that all residents of Estonia contribute more actively to their pension income.