Estonia, Financial Services, Pensioners

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Estonia: Maximum rate of management fees for 2nd pillar pension funds drops to 1.2%

BC, Tallinn, 03.01.2019.Print version
Starting from 2019, the maximum rate of the management fee for second pillar pension funds decreased from 2% to 1.2%, while, in case of positive investment performance, charging a success fee as part of management fee will be allowed, Informed LETA/BNS.

The amendments, which entered into force on Jan. 1, aim to increase the yields of the funds of the second pension pillar by decreasing the management fees, and expand pension funds' investment options, the Ministry of Finance said.


With the amendment, the previous management fee cap of 2% was lowered to 1.2% of the value of assets. The management rate limit for conservative pension funds is already 1.2%.


Pursuant to the adopted amendments, in case of positive investment performance, charging a success fee as part of management fee will be allowed starting from 2020. The fee can be added if the productivity of a mandatory pension fund exceeds the rate of growth of the pension insurance portion of social tax starting from September 2019, or, in case of funds established later than that, from the moment when the fund was established. A success fee cannot be charged for the management of a conservative pension fund.


The amendment eliminates some investment restrictions imposed on pension funds. From now on, funds investing a hundred % in shares are allowed. The concept of a conservative pension fund will be preserved, and the amendments will enable them to invest up to 10% of their assets in shares. Currently, said funds may not invest in shares.


Increased volumes of investment in real estate are now also permitted for second pillar funds, which is expected to support investment in Estonia. The maximum size of investment in a single piece of property has been raised from the current 5% to 10% of the value of a fund's assets.

 






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