28 November 2023
A Kantar Emor survey commissioned by LHV, which was conducted at the end of September, shows that Estonians' knowledge of the oldest saving solution – the third pillar – remains poor: for example, nearly half of the respondents are not aware that this entails a 20 percent income tax refund.
The survey reveals that 47% of respondents are not aware that the state refunds income tax on contributions to the third pillar on amounts not exceeding €6,000 or 15% of gross income. Weaker knowledge of the third pillar is most noticeable among younger savers aged 15–24: nearly half of young people (48%) say that they “do not know enough about this saving solution”. However, middle-aged savers aged 35–49 are more critical of third pillar pension funds. “It is somewhat surprising to see that this saving solution, which was launched at the same time as the second pillar, is significantly less known and its main advantage, commonly known as the income tax incentive, is also undeservedly underused,” said Joel Kukemelk, Member of the Management Board and Fund Manager of AS LHV Varahaldus.
Savers who are considering investing in the third pillar are prepared to shop less online (46%) and order takeout (36%) and buy coffee to go (26%) less frequently in order to save more. "At LHV, we can see that the popularity of the third pillar has grown in recent years, but the development could be faster. To make the third pillar a more attractive option, but also an easier choice for savers, we made a number of client-friendly changes to our funds in November. LHV third pillar funds now have new content and names that communicate the nature of the funds and their investment strategies more clearly,” explained Joel Kukemelk. “In addition to important investment changes, we have abolished the exit fee on LHV’s oldest third pillar fund (formerly known as Täiendav, now LHV Aktiivne) and lowered the management fee,” Kukemelk added.
The survey shows that real estate continues to top the ranking of Estonians’ investment preferences. 36% of respondents would consider buying a property if they had spare funds. In addition to real estate, term deposits (34%), securities (29%) and the third pillar (21%) are considered as investment options.
However, the reasons for keeping money at home or in a bank account were as follows: for 72% of respondents, the spare money acts as a 'peace of mind' fund for possible unexpected situations or expenses, 22% are waiting for the opportunity to renovate or furnish their home and 21% are planning a major purchase, such as a new vehicle.
The study included 1,024 people aged 15–74 from all over Estonia.
LHV pension funds are managed by LHV Varahaldus. LHV’s II and III pillar funds have more than 160 000 clients. The volume of assets exceeds 1,47 billion euros.
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