Some Estonian youth unaware they've joined pension system
In Estonia, the second pension pillar is formally voluntary; however, a "default" principle applies: if a person does not make a choice themselves, they are automatically enrolled in the system, and a pension fund is assigned at random.
"As a result, many young people become participants in the funded pension system without even realizing it," said Violetta Platonova, Head of Private Clients at LHV Bank, in an ERR broadcast.
While a person is not employed, this has no practical consequences—no money is contributed. However, once a first salary is received, mandatory contributions begin, and that is precisely when it becomes important to check where the money is going and whether the chosen fund meets personal expectations.
"In other words, the most suitable fund may not have been selected. That's why young people who are planning to enter the workforce, or who are already working but are not aware that they are contributing to the second pension pillar, should familiarize themselves with information about the funds and make a choice that works in their favor," Platonova said.
This can be done either immediately after turning 18 or later through the pension portal or a bank. If necessary, the fund can be changed: new contributions will start going to the new fund the following month, while the transfer of previously accumulated assets takes place according to established rules.
The bank representative emphasized that when choosing a fund, it is important to consider its performance, level of risk, and the time remaining until retirement. Young people are generally advised to consider higher-risk options; thanks to a long investment horizon, this may lead to higher returns.
Experts stress that the key point is not to leave the decision to chance and to consciously review at least once how future retirement savings are being built.
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Editor: Anna Mišina, Argo Ideon
Source: ERR Radio 4
