Pension

In 2026, the old-age pension age is 65.

From 2027, the old-age pension age will be 65 plus the change in the life expectancy of 65-year-olds. If life expectancy increases, the retirement age will also rise, and vice versa.

It’s possible to retire in terms of the second pillar five years before the state pension age as of January 2021. Disabled persons who cannot work have also been equalised with persons who have attained retirement age.

22% income tax must be paid when money is withdrawn from the second pillar before retirement age.

The payout of the money saved in the second pillar as a lump sum after retirement age is attained is subject to 10% income tax. However, if you enter into a lifelong pension agreement with an insurer in retirement age, the payouts made under the agreement are not subject to income tax. The same applies if you enter into an agreement for a specified term with an insurer, the term of which equals at least the number of average years left to live published by Statistics Estonia, or if a fund pension agreement (the pension is paid straight from the fund) with at least the aforementioned term is entered into.

Lower income tax rates of 10% and 0% are applied in the third pillar as of January 2021 on similar conditions as described for the second pillar above. 22% income tax must also be paid on the payouts made before retirement age.

Payments affecting the calculation of yearly (up to 6,000 euros per year) tax-free income:

• State pensions (I pillar);
• Payments made from the III pillar before retirement age, that are subject to income tax at the rate of 22%. As well as payments made to the heirs.

Payments not affecting the calculation of yearly (up to 6,000 euros per year) tax-free income:

• Payments made from the II pillar, that have been taxed with income tax rate of 22% or 10%.
• Payments made from the III pillar, that have been taxed with income tax rate of 10%.

Income tax is withheld upon the making of a payout.

Heirs can choose whether to withdraw the accumulated money as a lump sum or inherit pension fund units. If the accumulated money is withdrawn as a lump sum, income tax of 22% must be paid, regardless of the heir’s age. If pension fund units are inherited, they are transferred to the heir’s pension account(s). Once the heir reaches the old-age pension age, the inherited units can be withdrawn in cash at a more favourable income tax rate (10% or 0%). To arrange the inheritance, contact a bank of your choice.

The units of both Pillar II and Pillar III funds are held in a pension account. You can check your pension account balance in LHV’s online bank or mobile app, regardless of which bank you normally use.

You can also view the status of your LHV pension in all other Internet banks that you use every day or online at Pensionikeskus.ee.

Transfers of assets from insurance to fund or from fund to insurance should be started with an insurance company.

At the earliest, you can expect to receive the money five months as of the date of submission of your application.

Period for submitting an application to withdraw money	Money will be paid out (at the latest)
From 1 December to 31 March	On 20 September
From 1 April to 31 July	On 20 January
From 1 August to 30 November	On 20 May

Contributions to the second pension pillar are calculated on the income taxable in Estonia. If you do not have income taxable with social tax, no contributions are made to the second pillar and you will accrue no “debt”. It is not possible to make contributions to the second pillar at your own initiative.

Pension collection is a long process that may cover several decades, depending on the age of the individual. Contributing towards your pension is just like a marathon: it does not matter how fast you were in the first could of hundred metres. With your pension, it is important to follow the long-term rate of return figures, for instance, over a period of 10 years or from the time the pension system was set up. Brief, temporary concessions in yields do not affect the end result much.

You can transfer your pension assets from one fund to another or to a pension investment account (PIA) three times a year. Submit an application to transfer your accumulated money (an application to exchange fund units) by the following dates:

• By 30 November: the exchange takes place on the first business day of January;
• By 31 March: the exchange takes place on the first business day of May;
• By 31 July: the exchange takes place on the first business day of September.

No. Your choice of pension fund may not be influenced by any other benefit. A bank may not link loan interest rates to your choice of pension fund either (Funded Pensions Act, § 14(5¹)). If this happens, you should stand up for your rights and notify the Estonian Financial Supervision and Resolution Authority.

Since January 2021, saving in Pillar II has been voluntary, and you can withdraw the money saved in Pillar II before retirement age if you wish. Please note that before retirement age you can withdraw only the entire amount at once, you must pay 22% income tax on it, and you cannot start saving in Pillar II again until five years have passed.

Those who have reached retirement age or are close to it and want to receive all their accumulated assets straight away can do so at the reduced tax rate of 10% or tax-free.

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Since January 2021, saving in Pillar II has been voluntary. If you wish, you can leave Pillar II (by withdrawing the entire amount at once before reaching retirement age and paying 22% income tax on it) or suspend contributions. Whether you leave or suspend contributions, you cannot start saving in Pillar II again until five years have passed.

The pension investment account (PIA) and Pillar II pension funds form a single whole; the PIA is an additional option alongside the existing Pillar II funds. If you want to withdraw money from Pillar II before retirement age, you can do so only all at once. First, you must sell the investments held in your PIA for cash, and then submit an application to withdraw the money. The payment is made at the same time from both the PIA and the Pillar II fund(s). Partial withdrawals from the II pension pillar will be possible starting from 2028.

You can select and switch the funds similarly to the II pillar pension funds. If you do not yet have the III pillar, you need to first submit a choice application to start saving up for III pillar funds. In this application, you specify the III pillar fund(s) in which you wish to start making contributions. Unlike the II pillar choice application (that directs monthly contributions to just one fund), several funds can be specified in the III pillar choice application. To make contributions to the III pillar, you can set up a standing order in the (internet) bank or make one-off contributions.

You can invest at any suitable moment and just the amount you want to. You can make a single payment or a standing order, which you can cancel if desired.

The state refunds the income tax on the money invested in a III pillar pension fund in March next year. For instance, if you invest 100 € before the end of the year to the LHV Pensionifond Aktiivne III or LHV Pensionifond Indeks III, you shall receive an income tax return of 22 € from the state next year in March. To receive an income tax refund, you must mark down the III pillar investment in your income tax declaration.

Income tax shall be returned from an amount that does not exceed 15% of your annual taxable income or 6,000 € per year.

Similarly to the II pillar, the use of the III pillar pension fund services are not limited to one particular bank; the service is provided by account managers who have a relevant status: LHV Bank AS, Swedbank AS, AS SEB Pank and Luminor Bank AS.

You can view the history of your III pillar transactions and applications in the LHV Internet bank and under the heading “My pension account” on the Pension Centre’s web site. The III pillar transactions information can be found under the heading “My pension account” on the Pension Centre’s web site.

If you have not previously made payments into the III pillar pension funds you will need to submit a III pillar choice application.

By submitting a III pillar choice application, a pension account shall also be opened in the case you do not yet have neither II nor a III pillar. If you own a pension account and are also looking to acquire III pillar pension fund units, you will need to submit a selection application, with which the III pension pillar portion of your pension account will be activated.

A III pillar choice application with the objective of opening a pension account and identifying yourself, can only be submitted via an account manager, i.e. at the bank where you have concluded a client agreement (LHV Bank AS, Swedbank AS, AS SEB Pank and Luminor Bank AS). Customers of LHV Bank can submit a III pillar choice application through LHV internet bank.

If a III pillar choice application exists, the funds transfer payment order does not need to include the ISIN code of the requested pension fund. The choice application could also include several III pillar funds. In such a case, the amount paid shall be directed into your selected funds, in accordance with the proportion marked on the selection application.

You should make a bank transfer (payment order) to buy III pillar units. If you want to make regular purchases, it is reasonable to add a standing payment order in the internet bank. You can also transfer money to several funds with one payment order if you have submitted the III pillar choice application. In such a case, an ISIN code will not be added in the payment order’s description. Customers of LHV Bank can buy LHV’s III pillar pension fund units through the LHV internet bank’s pre-filled form “Contributions to the III pillar”. Purchased pension fund units are reflected in the pension account within 2 working days at the latest.

The payment order processing code 30101119828, which refers to payments to Pillar III, must always be added first in the explanation line of the payment order. The following parts of the explanation depend on whether you want to personalize yourself with a personal identification code or pension account number and whether you want to use the selection application or not.

It is very important that the information in the line “Explanation” is filled correctly. Otherwise, the payment may be returned to you and your Pillar III will not be activated.

If you wish to purchase fund units on the basis of a selection application, please complete the payment order exactly as follows:

Sample payment order with your ID code:
Beneficiary’s name
AS Pensionikeskus
Account no
EE547700771002908125 - LHV Bank AS
EE961700017004379157 - Luminor Bank AS
EE141010220263146225 - SEB Pank AS
EE362200221067235244 - Swedbank AS
Payment description
It is very important that the information is entered exactly as in the example here (inc. a space, a comma, the abbreviation “IK” and a colon). Otherwise, the payment may be returned to you and your Pillar III will not be activated.
The line “Payment description” must contain: 30101119828 and your personal identification code in the form “IK:XXXXXXXXXXX”.
An example of how this information should look like in the “Payment description” line:
30101119828, IK:your ID code
Amount
Amount invested in euros
Reference no
Leave the reference number field empty

Sample payment order with your pension account number:
Beneficiary’s name
AS Pensionikeskus
Account no
EE547700771002908125 - LHV Bank AS
EE961700017004379157 - Luminor Bank AS
EE141010220263146225 - SEB Pank AS
EE362200221067235244 - Swedbank AS
Payment description
30101119828
Amount
Amount invested in euros
Reference no
Your pension account number

• If you wish to purchase units of a specific fund (you can also purchase units of other funds that are not mentioned in your selection application), please complete the payment order exactly as follows:

Sample payment order with your ID code:
Beneficiary’s name
AS Pensionikeskus
Account no
EE547700771002908125 - LHV Bank AS
EE961700017004379157 - Luminor Bank AS
EE141010220263146225 - SEB Pank AS
EE362200221067235244 - Swedbank AS
Payment description
It is very important that the information is entered exactly as in the example here (inc. spaces, commas, the abbreviation “IK” and a colon). Otherwise, the payment may be returned to you and your Pillar III will not be activated.
The line “Payment description” must contain: 30101119828, the desired fund’s ISIN code and your personal identification code in the form “IK:XXXXXXXXXXX”.
An example of how this information should look like in the “Payment description” line:
30101119828, EE…, IK:your ID code
Amount
Amount invested in euros
Reference no
Leave the reference number field empty

Sample payment order with your pension account number:
Beneficiary’s name
AS Pensionikeskus
Account no
EE547700771002908125 - LHV Bank AS
EE961700017004379157 - Luminor Bank AS
EE141010220263146225 - SEB Pank AS
EE362200221067235244 - Swedbank AS
Payment description
It is very important that the information is entered exactly as in the example here (inc. a space and a comma). Otherwise, the payment may be returned to you and your Pillar III will not be activated.
The line “Payment description” must contain: 30101119828 and the desired fund’s ISIN code.
An example of how this information should look like in the “Payment description” line:
30101119828, EE…
Amount
Amount invested in euros
Reference no
Your pension account number

Required ISIN codes:
LHV Pensionifond Aktiivne III: EE3600010294
LHV Pensionifond Indeks III: EE3600109419

The pension account number can be found quickly if you log in to the “My pension account” section on the Pension Centre’s web site.

Money could be returned for several reasons. Firstly, the amount paid into the fund was smaller than the established minimum amount, which can be found in the fund prospectus. You should be extra careful when using a choice application when making the payment, as this distributes the transferred amount proportionally among the selected funds. Another reason could be that you have just started collecting in the III pillar and have not yet submitted the III pillar choice application. It is compulsory to submit a choice application when you start collecting in the III pillar. Third, you may have made a mistake in executing the payment order. When purchasing third pillar fund units, the correct execution of the payment order is extremely important. See point 8. What should I write on the payment order?

Exchange will be formalised as an application, which you can submit on the LHV Internet bank, at a branch or under the heading “My pension account” of the Pension Centre. You can exchange fund units from one III pillar fund to several target funds.

If you want to exchange units between the funds of different fund management companies, you need to take into account that the management company shall be entitled to apply a unit redemption fee and issue fee in the amount established in the pension fund terms and conditions. The fees shall not apply if you exchange from one fund of the management company to another.

This may not be a sensible decision, as you first have to pay 22% income tax when withdrawing the money from the second pillar and you will also lose the part of the social tax (4%) previously added to the second pillar by the state. You get an income tax rebate on the contributions made to the third pillar, which is up to 15% of the annual gross income, but not more than €6,000. If you leave the third pillar before you attain retirement age, the entire amount will be subject to income tax.

You can submit the payout application in the LHV Internet bank, at a suitable bank branch or under “My pension account” in the Pension Centre. You can sell several different funds with the same application. If you sell the units of several pension funds at once, you must keep in mind that the money will be transferred to you when all the sales specified in the application have been done and the income tax has been calculated.

You can sell the units of LHV Pensionifond Aktiivne III and LHV Pensionifond Indeks III on every banking day. The exit fee for LHV III pillar funds is 0%.

The retirement age of people who subscribed for the third pillar before 2021 is 55 years. The retirement age of people who subscribed for the third pillar as of January 2021 starts equally to the second pillar, i.e. you can retire up to 5 years before you attain the state pension age or if you lose your capacity for work.

The payouts made before retirement age (not just the profit, but the entire payout) are subject to income tax at the effective rate (22%) as of January 2021.

One-off payouts are subject to 10% income tax: after the unitholder attains retirement age, but not before five years have passed from the first acquisition of voluntary pension fund units; in the case the unitholder becomes incapacitated for work.

You can withdraw the money without paying any income tax if you’ve attained retirement age and entered into a lifelong pension agreement or long-term pension agreement for a specified term (the payments are divided across at the least the average number of the years left to live).

All Estonian tax residents who have not subscribed for the second pillar yet can do so as of January 2021. In order to subscribe, you must submit a choice application, which you can do in the LHV Internet bank, at a suitable bank branch or under “My pension account” in the Pension Centre.

In order to open third pillar account for your child, contact the bank where you have opened a current account for the child.

If the child has an account with LHV Bank, the respective request can be sent to the LHV customer support e-mail address info@lhv.ee or visit a bank branch suitable for you.

As the declaration of income and other related tax accounting is personal, the parent will not receive a tax refund for the contributions made to the 3rd pillar fund in the child’s pension account. A person whose pension account has received contributions for their supplementary pension fund has the option of a tax refund. If the minor has received income during the year and has also paid taxes, then their declaration also reflects the 3rd pillar payments made to their pension account, and then the minor has the opportunity to receive a tax refund when declaring income.

Index funds invest in certain index-following funds irrespective of the market situation, and there is no active management of assets in these funds. The composition of assets in an index fund is stable, meaning that such funds do not adapt to changes (unlike funds that have a fund manager). Figuratively speaking, index funds always operate at full throttle. There are bound to be periods where the yield of such funds is highly negative. When the market falls, the fund manager cannot do anything to reduce the risks. The client has a much bigger role when evaluating fund compatibility, whereby such funds are suitable for clients with previous investment experience who can assess the fund risks.

As the index funds do not have active management, i.e., active addition and reduction of risks according to the market situation, it means that such funds have lower management fees.

We are able to provide the service for such a low fee since LHV’s fund business has reached a critical mass and all the functions related to the administration of funds have been constructed. From this fee, conventional third-party costs as well as LHV’s administrative costs are covered.