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Raising children impacts pensions

A parent (or the spouse of a parent, guardian or caretaker in the family) who has raised a child of up to 18 years of age for at least 8 years has the right to receive a higher pension and retire earlier (if there are at least three children or the child has a disability).
One right can be simultaneously used by one parent. The arrangement of who will use which right shall be agreed by the parents in written form. If no agreement is reached, the rights shall be equally distributed between the parents.

 

Child-related pension supplements

The exact supplement to be added to the pension depends on the child’s time of birth:

  • Children born before 1991 

    we shall grant two additional years to the pension qualifying period and a pension supplement in the extent of one yearly rate for each child;

  • Children born between 1991 and 2012 

    we shall grant a pension supplement in the extent of three yearly rates for each child;

  • Children born in 2013 and later

    • If the parent has joined the 2nd pension pillar, we shall pay an additional 4% of the average income subject to social tax per one calendar month in Estonia to the pension account each month from the child’s birth until the age of three. Read more
    • If the parent has not joined the 2nd pension pillar, we shall grant a pension supplement in the extent of three yearly rates.

One right can be used by one parent. However, different rights may be distributed between one another. For instance, one parent can retire early for raising children and the other can receive the pension supplement.

The arrangement of who will use which right shall be agreed by the parents in written form and they shall send respective requests on applying for a pension supplement for raising a child and on surrendering thereof to the email address info@sotsiaalkindlustusamet.ee. If no agreement is reached, the rights shall be equally distributed between the parents.

The year of pensionable service as well as the pension supplement add a certain amount to the pension and the size of this amount is dependent on the yearly rate, which changes every 1 April.

For instance, as of 1 April 2020, the yearly rate of pension is 7.104 euros. Read more about the indexing of pensions.

The pension supplement shall be added to all pensions other than national pensions, superannuated pensions and special pensions. In the event that the amount of the old-age pension has not been calculated based on the person’s own pension qualifying period information, the pension supplement shall not be added.

Example 1. Peeter and Inga are married. They have three children. The first child was born in 1979, the second child in 1984, and the third child in 1992. Once Peeter retired, they decided together that his pension shall be increased in relation to raising children.

His pension was supplemented by two years of pensionable service and a pension supplement in the extent of one yearly rate for the first as well as the second child. For raising the third child, Peeter received a pension supplement in the extent of three yearly rates, since the child was born after 1991.

Example 2. Kaspar and Liia had a child in 2014. Liia has joined the 2nd pillar, while Kaspar has not. They decided together that from the birth of the child until they reach the age of three, Liia shall receive contributions for raising the child to the funded pension on her 2nd pillar account. Therefore, Kaspar will no longer be applicable for a pension supplement for this time in the future.

 

Old-age pension under favourable conditions

You can go on old-age pension earlier if you are a parent, spouse of a parent, guardian or caretaker, and have raised for at least eight years:

a child with a moderate, severe or profound disability – five years earlier;

five or more children – five years earlier;

four children – three years earlier;

three children – one year earlier.

If you go on old-age pension under these conditions, the size of your pension shall not decrease, unlike in the case of an early retirement pension.

If several persons have the right for early retirement in relation to the same child, they shall agree in written form on who will execute this right. If no agreement is reached, the right shall be equally distributed between the parents.

Read more about applying for pension.

 

Additional contributions to the mandatory funded pension

In respect of children born since 2013, one parent at a time has the right to receive additional contributions to their funded pension, i.e. 2nd pillar account, from the birth of the child until they reach the age of three.

We pay an additional 4% (47.31 euros per month in 2020. In 2021 it will be 50,95 euros per month) of the average income subject to social tax per one calendar month in Estonia to the funded pension account each month. For the month of the birth and for the month the child turns three, additional contributions shall be made for the amount of days such right is applicable.

We make contributions to one parent at a time.

  • If both parents have a funded pension account and you wish to distribute additional contributions between one another, you can change the recipient of the contributions during the period of receipt. We shall direct the contributions to the new recipient as of the day of submission of the request.

  • If only one parent has joined the 2nd pillar – you can decide together whether you wish for this parent to receive additional contributions to their pension account. In this case, that parent will receive a higher pension in the future for raising a child. However, if you wish the raising of the child to increase the pension of the other parent, waive the additional contributions. The other parent shall then receive a pension supplement in the extent of three yearly rates to their pension. If they wish, the holder of the pension account can apply for contributions for a shorter time period than until the child reaches the age of three. In this case, the other parent shall receive a pension supplement proportionally for the number of months, for which additional contributions were not made.

NB!

if you have joined the mandatory funded pension, your future pension supplement will only depend on whether you have used your right for additional contributions. There is no right for a pension supplement in this case.

You can confirm your wish to receive additional contributions to the funded pension along with other family benefits via our self-service

If you have registered the child in the population register, we will receive this information automatically the following day. We will then send an offer of benefits for both parents in the self-service. There you will also find additional contributions to the funded pension, which you can either keep, transfer to the other parent or waive.

In order to receive additional payments to the funded pension as of the birth of the child, it must be confirmed within six months after the birth of the child.

The state shall temporarily suspend 2nd pension pillar contributions during the period 1 July 2020 – 31 August 2021

Due to one of the crisis measures arising from the emergency situation, state contributions (4%) to the second pension pillar shall be suspended from 1 July 2020 until 31 August 2021. This does not apply to people born between 1942–1960, to whom state contributions shall continue as usual.

In October 2020, a person can additionally also suspend the 2% contributions from their remuneration for the period of 1 December 2020 until 31 August 2021.
Everyone who continues their 2% contributions shall be compensated by the state in retrospect in 2023–2024 to the extent of double the amount of the contributions made in the period 1 July 2020 to 31 August 2021.

This amendment does not apply to additional contributions to the funded pension, which the Estonian National Social Insurance Board credits to the pension account of parents of children under the age of three! Additional contributions shall continue as usual.

More information on the temporary suspension of contributions to the 2nd pension pillar is available on the website of the Ministry of Finance (PDF)

 

 

In 2020, people born in 1970–1982 can once again join the mandatory funded pension upon request.

This year, people born in 1970–1982 can once again submit an application to join the 2nd pillar. In order to join, submit a choice application at the bank or at the Pensionikeskus by 30 November 2020 at the latest, contributions to the selected pension fund shall commence as of 1 January 2021.

Joining the 2nd pillar voluntarily in 2020 will affect the pension, depending on the child’s time of birth:

  • if the child is born before 1 July 2020, the parent is not entitled for additional contributions to the funded pension. A pension supplement shall be used in this case;
  • if the child is born between 1 July and 31 December 2020, the parent can choose whether to receive a pension supplement or additional contributions to the funded pension account;
  • if the child is born on or after 1 January 2021, the parent is fully entitled to additional contributions.