President promulgates mandatory funded pensions reform

Kersti Kaljulaid. Photo: Raul Mee/Postimees Grupp/scanpix Baltics

President Kersti Kaljulaid on Tuesday promulgated the law on the reform of mandatory funded pensions which makes substantial changes to the existing pension system, after the Supreme Court had turned down the president’s request to declare the reform unconstitutional. 

“It is the duty of the head of state in the Republic of Estonia to see to it that our legislative practice remains in the constitutional track. One goes to the Supreme Court not to win or lose, but to achieve legal clarity. With an issue so extensive and of such impact on the whole society as extensively changing the existing pension system, it was important to achieve clarity on issues in debates on all possible levels. The Supreme Court has made its decision, and so I immediately promulgated the law,” Kaljulaid said.

The reform gives working-age people the opportunity to withdraw money from the mandatory pension fund and pensioners the right to terminate a pension contract concluded before 2021 and demand a lump sum.

The Supreme Court found that the law infringes the fundamental right to property and equality and freedom of enterprise. However, on the basis of current forecasts, it was not possible to conclude with sufficient certainty that the Constitution was being violated. The objectives of the reform – in particular to increase people’s freedom of choice – outweigh the violations of fundamental rights and a number of solutions have been put in place to offset them.

When the reform of mandatory funded pensions takes effect, people who have not yet reached retirement age would be entitled to demand the redemption of the units of a mandatory pension fund as well as the payout of money in their pension investment account. In addition, the reform would entitle people to terminate their pension agreement concluded before January 1, 2021 and be paid out an amount equaling the surrender value of the pension agreement.

President Kersti Kaljulaid decided not to promulgate the law on the reform of mandatory funded pensions on February 7, 2020. The Riigikogu passed the bill in unchanged form again on March 11 and on March 16 submitted the bill to be promulgated by the president.

The head of state decided not to promulgate the pension reform bill and turned to the Supreme Court with an application to declare the bill inconsistent with the Constitution.