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Second Pillar Pension Payments

The state suspended the payments made from social tax to the second pension pillar (4%) from 1 July 2020 until 31 August 2021. With the exception of people born between 1942–1960, whose second pillar payments will continue as normal.
From October 2020 everyone that has joined the second pillar can choose whether to opt out of the 2% payment on their wages.
To do so, they will need to submit an application for opting out of the payments during October 2020 either at the Centre for Pensions or at a bank.
Pursuant to the applications, the 2% payments will be halted from December 2020 until 31 August 2021. If they so choose, people born between 1942–1960 may also halt payments – if they submit the application for opting out of the payments, their 4% payments will be halted.
People who choose to continue the 2% payments during the period when the 4% payments from social tax are not made into the second pillar, will later be compensated for the 4%. To compensate for the 4% payments from social tax, a person’s 2% payments into the second pillar for the period from 1 July 2020 until 31 August 2021 will be calculated and doubled. If the average productivity of the second pillar pension funds for the period from 1 July 2020 until 31 December 2022 is positive, the sum compensated will be increased by the average productivity. Negative productivity will not be accounted for. The compensation will come out of the state budget and will be paid during the years 2023 and 2024.
Compensation will not depend on whether the person is employed in 2023 and 2024 and is contributing to the second pillar as ordinary. If they are not on the employment market but made the 2% payments on their wages during the period from 1 July 2020 until 31 august 2021, they will receive compensation on actual payments.
Employers must verify whether to halt or continue their employees’ funded pension payments from 1 November 2020. If an employee has submitted an application to opt out of the payments, that employee’s funded pension payments must not be declared on the TSD tax declarations form from December 2020 until August 2021. If an employee has not submitted the application, the funded pension payments will be declared as usual.
People who have submitted the application will also not make the funded pension payment on the income on their entrepreneur account.
A self-employed person who has submitted the application will not make the funded pension payment on one-twelfth of their business income for 2020.

We offer tax advice as a separate service as well as part of our accounting service.

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