A pension reform that took effect a few years ago allowed people to withdraw their savings from the second pillar. That move came with a restriction: those who left would only be allowed to rejoin after 10 years.

The state now wants to shorten that waiting period to five years, which is supported by banks.

Swedbank Head of Investment Funds Age Petter said this would allow people to save more effectively. "The current 10-year restriction did not fulfill its original purpose and it is too harsh a measure for a person to actually be able to save well for retirement," he said.

The ministry also plans to introduce a one-time withdrawal policy before retirement age. However, banks think the rule should not be so strict.

"We believe people may be frightened by the thought that if I come back, what happens then? If I have some life event and I definitely need that money, but I cannot use it," Petter said.

Minister of Finance Jürgen Ligi said the new restriction is justified. He highlighted the big problems that followed the previous reform.

"This is not rigidity. In fact, the aim of the previous major dismantling was to liquidate the system. The first pillar is clearly not enough to live satisfactorily in old age, and we do not want a system where pensioners end up dependent on subsistence benefits," he said.

Additionally, from 2028, partial withdrawals from the pension fund would be allowed. This would help resolve situations where, when a need for money arises, the entire amount saved currently has to be withdrawn at once.

Swedbank supports the change.

"Withdrawing money before retirement age should be a very major exception. Unfortunately, today it is not a very major exception. It certainly must not become normal behavior, but there are cases in life where money can genuinely be a matter of life and death. The idea of being able to use only part of the money is precisely so that the person would continue saving," Petter said.

The broader economic impact is also being taken into consideration.

Early withdrawals increase pension funds' need for liquidity and reduce their ability to make long-term investments. While funds previously directed about 20 percent of their assets to Estonia, that share has now fallen by nearly half because the money has to be more quickly available to people.

Stability is important for pension funds, the finance minister said.

"Money invested in the Estonian economy is not as liquid as money invested internationally. This dismantling led to a situation where people no longer dared invest in Estonia, because at any moment you must have a very liquid portfolio," Ligi outlined.

The future of the pension system is overshadowed by a certain degree of political uncertainty.

The Ministry of Finance and the Reform Party want to strengthen and restore the second pillar, in case Isamaa, which implemented the previous pension reform, could reverse the system again if it returns to power after the next Riigikogu elections.

"That concern certainly exists, and in fact it exists in a large part of the country, because people are essentially being promised that the continuity of the state can be changed. Our hope is that this dismantling can no longer be accepted as naively as it seemed back then, when people's heads were confused. Now people are beginning to understand that retirement is approaching, and the number of people who would like to return has increased," the minister of finance said.

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