Date: 27th October 2020

On Tuesday, 20 October 2020, the Supreme Court of Estonia ruled that the current government’s hotly contested pensions “reform” is not unconstitutional. The reform is set to dismantle the foundation of the second (occupational) pillar of the Estonian pension system. It is worth noting that many of the Judges who ruled in its favour, did admit that although the law is likely to have an overall negative effect on second pillar pensions and does violate some property rights, it does not breach the Constitution.

Indeed, the new law in Estonia will allow people to stop contributing to the - until now mandatory - second pillar pension and to dip into their accumulated pension savings at any age, as is the case in other EU Member States that are authorising early withdrawals in response to the economic fallout from the Covid-19 crisis.

The government argues that the new law will also give people more freedom and choice on how to invest their savings than is currently the case. However, surveys conducted by Kantar Emor show that most of the people who, given the opportunity, intend to liquidate their current pension fund savings, would use the money to cover running costs, such as home renovations or paying back loans, rather than investing for retirement.