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II pillar

The II pension pillar is the easiest way to invest in your future and accumulate pension savings. The amount collected is heritable and you can withdraw it at your convenience. However, it would be wise to do this at retirement age, otherwise you will have to pay a 20% income tax.

Unique 2 = 6

The state contributes significantly more than you do: for every 2% you add, the state adds 4% from social tax, making a total of 6%. Do the math any way you want, this is certainly more than if you were saving up alone.

Rate of return of the pension funds

Simply keeping money in your account means you miss out on potential returns and the value of your money even decreases due to inflation. The average annual return of the II pillar pension funds has been 4.2%.

Long-term saving

Time is the best friend of a saver in the II pillar: a small amount each month will add up to a large sum decades later. Over a period of 10 years, at the current average salary, EUR 10,000 is accrued, to which productivity and compound interest are added.

Joining the II pillar is free and only takes a few minutes. It is just as easy to switch funds later.

Bring your II pillar to us

Why save at LHV?

Best rate of return

Our investment policy is to achieve the highest possible long-term rate of return. Over the past 15 years, LHV pension funds have performed the best in Estonia.

Firm management

The assets of LHV pension clients were better protected during the last major economic crisis. We will do our utmost to ensure that future economic shocks also have as little of an impact on savings as possible.

Green future

We were the first to launch an environmentally friendly fund with the aim of making the economy more sustainable. With your choice, you contribute to a greener future.

Support of Estonia

Out of the Estonian pension funds on the market, LHV’s funds are the most active in making investments in Estonia. We have our own large and capable local investment team.

Choose the right pension fund

At LHV, you can choose between seven II pillar pension funds. Whether you prefer diversified risk funds with different asset classes (XL, L, M), a high-risk index fund with the lowest possible costs (Indeks), believe in the world’s green transition (Roheline), or aim to preserve your money (S, XS) – our selection will certainly have a II pillar fund for you. When choosing a pension fund, you should consider the level of risk and the planned accumulation period. Also see the results of all Estonian II pillar funds.

Accumulate your pension where it grows

Three easy steps to join the LHV II pillar

  • Log in to the self-service or use the My Pension app and submit your II pillar selection application.

  • Choose a suitable pension fund, exchange units and/or redirect payments.

  • That’s it. Today’s decisions can start earning money for your future.

Read about the thoughts of other pension savers.

"None of my time is spent on it because the bank carries out the investment transactions itself. Less risk of something going very wrong with the money."

"The pension contributions from my salary have been almost imperceptible, and I have not really missed that money. My pension pillar has also produced a good return and the amount of money in it has only increased."

"Savings have rebounded at LHV."

"Safe place, a tax advantage, unable to spend money on a whim."

"You do not have to make any extra adjustments by yourself, and the money accumulates automatically."

"I want to secure a higher income for retirement."

"Contribution by the state, with the option to choose between different forms of payouts later on."

"Convenient, no need to do anything."

"At present, the rate of return is good."

Myths about pensions

CLAIM

‘Inflation is eating up my money’

REALITY

Typically, pension funds have a rate of return. If the rate of return is positive, it will help to grow your savings and also cope with inflation. So far, the average rate of return of Estonian pension funds has been 4.2% per annum and it has exceeded inflation, however, the ambition and performance of LHV pension funds have been more than a good average.

CLAIM

‘I won’t even reach retirement’

REALITY

You can withdraw your pension money when you want, but you must take into account the current tax regime. In addition, what is accumulated in the II pillar is heritable, but the rights of the state pension, i.e., the I pillar, are not. The average life expectancy in Estonia is currently 74 for men and 82 for women.

CLAIM

‘I invest better myself’

REALITY

When times are good, investing seems very easy and everyone wants to do it themselves. However, there is no other unique system like ours, where the state contributes much more than you do. Take advantage of all the preferential investment products offered by the state, such as the II and III pension pillar, as you will certainly save up more than you would on your own.

CLAIM

‘The retirement age is always being raised’

REALITY

While people are currently working out of their own volition, working will become the new normal in the future as the retirement age moves further away. One of the beneficial changes of the pension reform is the flexibility of withdrawals. You can withdraw money in any case – but it is better to do it when you are older and other income is lower.

CLAIM

‘I want to reduce existing commitments’

REALITY

Withdrawing money before retirement age is simply too costly and doing so makes you miss out on a unique savings scheme that turns 2% of your gross salary into 6% of your personal pension money. Take your time to assess the different options and come for a consultation. If you leave the II pillar now, you will not be able to rejoin it until 10 years have passed.

CLAIM

‘Management fees are too high’

REALITY

Estonian pension funds have reduced fees by about 2.5 times within the past 10 years. Fee rates are at or even below the level of pension systems in other countries. LHV’s management fees are average in Estonia, but the results are the best over the past 15 years.

CLAIM

‘Rate of return is poor’

REALITY

Pension accumulation is a long-term process, and during this time the economy is hit by many crises. It is important to be a winner in the long run. The assets of LHV pension clients were better protected during the last major economic crisis from 2008 to 2010.

CLAIM

‘The government changes, so the public policy of the state may change’

REALITY

Lengthy court disputes in 2020 showed unequivocally that what is accumulated in the II pillar is the personal property of a person that cannot be taken away at will by any government. As long as the state offers the possibility of converting 6% of your tax money into your personal pension through the II pillar, with you contributing only 2% of your gross salary, it is worth holding on to this option. There is no other investment solution as attractive as this.

CLAIM

‘Unexpected costs need to be covered’

REALITY

We understand that there are all sorts of situations in life and sometimes unexpected expenses cannot be avoided. But there are other ways to collect, such as the III pillar. The III pillar is one of the most flexible investment options, where you can add money in the amount you want and withdraw it as soon as you need it. In addition, the state refunds the 20% income tax on contributions to the III pillar. Example: if you pay EUR 1000 into the III pillar this year, the state will refund EUR 200 to you next year. Read more about the III pillar.

CLAIM

‘My children are my pension pillar’

REALITY

Of course, children want to help their parents, but they have their own responsibilities too, and it is possible that you may be reducing their chances of one day being able to manage their future in a better way. After all, it is a good feeling to be able to look after yourself in old age.

CLAIM

‘I keep all my banking in one place’

REALITY

The truth is that things should always be where they perform well. Over the last 15 years, LHV has shown that it is good place for your pension to grow. Keep your pension where it grows the most efficiently.

CLAIM

‘I am putting money from the II pillar into the III pillar’

REALITY

This is unlikely to be a wise decision, as you will first have to pay the 20% income tax when withdrawing money from the II pillar, and then you will also not be able to count on the social tax portion (4%) that has been added by the state to the II pillar. In addition, you will not be able to rejoin the II pillar for the next 10 years.

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