The Estonian government has approved amendments seeking to simplify the transfer of inherited second-pillar pension assets to the successor’s second-pillar pension account, and additionally, closing a pension investment account and moving funds between third-pillar insurance contracts and pension funds will become more flexible.
“The second and third pillars are some of the most popular investment products in Estonia, and we want to keep it that way. Additional saving is crucial to ensure adequate income during retirement. Simplifying inheritance rules is a good opportunity to leave inherited assets in the second pillar pension fund to generate returns, thus further boosting pension funds,” Finance Minister Mart Võrklaev said.
Although most people prefer to withdraw money from the pension fund when inheriting it, there is a growing trend of transferring inherited assets to the successor’s second pillar pension fund. Currently, this requires transferring the inherited assets to one’s pension account and then making a separate application to direct these to a chosen pension fund.
In the future, if the successor wants to transfer inherited assets to their pension fund, they will no longer need to submit a separate application. If they wish to select units of another pension fund, this will still require a separate transaction to exchange pension fund units.
The conditions for closing a pension investment account will become more flexible. To close the account, financial assets must be sold. If some securities have become unsellable, the amendments will allow these securities to be transferred to a regular securities account to close the pension investment account.
In the third pillar pension fund, partial exchanges will be allowed for supplementary funded pension insurance contracts. Currently, to make an exchange, the insurance contract must be terminated. In the future, the contract can be modified, and it will become possible to only transfer a part of the accumulated funds to another insurance contract or voluntary pension fund. Partial exchanges have so far only been possible for pension funds.
Additionally, there will be some changes due to the implementation of European Union regulations. Although sustainability information is currently published for mandatory pension funds regarding the investment of fund assets and risk management, the legislative amendments will standardize the requirements for publishing such information. In the future, mandatory pension funds will also need to adhere to the relevant EU regulation.
The legislative amendments will come into force in general procedure, except for the provisions related to the inheritance of second-pillar pensions, which will take effect in 2025.
Source: BNS
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