At Thursday’s sitting of the Riigikogu, the Bill that will amend the procedure for making payments from funded pension pillars II and III passed the first reading.
The aim of the Bill on Amendments to the Funded Pensions Act and the Investment Funds Act (427 SE), initiated by the Government, is to improve the competition situation, to offer alternatives in the payment of pension, and to make the whole system even more transparent.
The Bill will extend the choice of pension contracts offered to retiring persons who have joined the pension pillar II (mandatory funded pension). Besides pension contracts with a guaranteed interest rate, life assurance undertakings will be able to offer also pension contracts with an investment risk; the amount of pension paid on the basis of such contracts will depend on the investments made.
In connection with introduction of new contracts, the current principle that only one pension contract can be entered into when retiring will also be changed. In the future, unit-holders will be able to enter into several pension contracts, for example, one with an investment risk and another with a guaranteed interest rate.
In the future, people who will have accrued less money (less than 50-fold national pension rate which is 8797 euro at present) by the moment of retirement will be able to choose between fund pension and a pension contract entered into for a fixed term. So people who will have accrued less money into the pillar II and who do not wish to bear investment risk when they are retired will be able to enter into a fixed-term pension contract where the amount of pension will no longer depend on investment results monthly.
The Minister of Finance Sven Sester said that the Bill took into account that, as a general rule, elderly people prefer insurance rather than taking potential risks. “Payments will be made under a fixed-term pension contract for the same period as in the case of fund pension. The term of the contract will depend on how young the pensioner is, that is, for example, when retiring at the age of 65, a contract will have to be entered into for at least nine years. However, in such a case, the life assurance undertaking will take the investment risk, and not the pensioner,” Sester explained.
Differently from the usual practice, it will also be possible to exchange pension agreements. The Bill will specify the rules for calculating the surrender value of a pension contract and the conditions for exchanging contracts.
As regards the pillar III, the regulation of insurance contracts for supplementary funded pensions concerning the offering of occupational pension schemes will be amended. Besides the contracts entered into so far, life assurance undertakings will thereby be given the possibility to offer contracts under which no payments are made before the policyholder has attained the retirement age agreed in the contract. With that, conditions for offering insurance contracts for supplementary funded pensions will be created that could increase employees’ motivation to accrue pension for their employees.
The Bill will transpose into Estonian law the relevant EU directive on minimum requirements for enhancing worker mobility between Member States by improving the acquisition and preservation of supplementary pension rights.
The amendments concerning the entry into pension contracts under new conditions are planned to enter into force on 1 January 2018, and the amendments concerning the transposition of the directive are planned to enter into force on 21 May 2018.
Three more Bills passed the first reading in the Riigikogu:
The Bill on Amendments to the Estonian Central Register of Securities Act and Amendments to Other Associated Acts (428 SE), initiated by the Government, will increase competition between central securities depositories holding securities. Another aim of the Bill is to widen the possibilities for enterprises to engage capital, to merge information on pension pillar II and III to single pension account and to facilitate the possibility of persons of foreign countries to invest into Estonia.
Central securities depository is a body that maintains the register of securities holders and settles securities transactions. Competition between central securities depositories will increase because the Bill will widen the possibilities for Estonian public limited companies to register their shares also in other central securities depositories providing services in Estonia, instead of the Estonian Central Securities Depository (Estonian Central Register of Securities Ltd). The amendments derive from the EU Central Securities Depositories Regulation (CSDR-Regulation).
The Minister of Finance Sven Sester explained that all nearly 3000 public limited companies registered in Estonia were required to register their shares in the Estonian Central Register of Securities. “As a result of the amendment, the costs for the maintenance of the register paid by public limited companies may drop because public limited companies will have the possibility to register their shares also in other central securities depositories,” Sester said.
To widen the possibilities for enterprises to engage capital, the Bill will raise the prospectus-free threshold from the current 100 000 euro to one million euro. This means that if capital is engaged in an amount below one million euro, there will be no obligation to draw up a prospectus, that is, a survey introducing the enterprise.
The Bill will merge information on the pillars II and III into single account – pension account. Today records have been maintained on pillar III units on ordinary securities account, and records have been maintained on pillar II units on separate pension account. According to the Bill, the transfer to using pension account will take place during the summer of 2018.
The Bill will facilitate the possibilities for citizens of foreign countries to invest into Estonia and to engage in business here. For that, public limited companies and private limited companies registered by them in Estonia will be enabled to open securities accounts for holding shares in central securities depository without the intermediation of a bank. According to the Bill, this possibility will be opened in 2019.
The Bill on Amendments to the Insurance Activities Act and Amendments to Other Associated Acts (429 SE), initiated by the Government, will transpose the EU directive regulating the requirements for insurance distribution. The aim of the directive is to harmonise the requirements for insurance distribution in different insurance sales channels in order to ensure the protection of customers.
The Bill will for the first time obligate insurance undertakings to write down the stages of the manufacturing of insurance product and placing it on the insurance market. The Bill will amend the regulation of sales requirements for cases where insurance is offered together with other products or services. The Bill will amend the requirements for the content of the information provided to the customer on insurance.
Minister of Finance Sven Sester explained that non-life insurance providers would have to draw up a separate summary information document on each insurance relationship. “In the future, an information document in a standardised format will give the customer an overview of the insurance product, and that will help the customer to compare non-life insurance products and to make well-considered decisions,” Sester said.
The regulation is planned to enter into force on 23 February 2018.
The Bill on Amendments to the Auditors Activities Act and Other Associated Acts (409 SE), initiated by the Government, will bring Estonian law into conformity with relevant amended EU documents. In the first place, the organisation and funding of public oversight of auditors activities, the distribution of the competence and tasks of the Ministry of Finance and the bodies of the Board of Auditors, and the definition of “public-interest entity” will be reviewed.
Under an EU directive, in order to enhance the transparency of auditor oversight and to allow for greater accountability, each Member State should designate a single authority to be in charge of public oversight of statutory auditors and audit firms. Therefore the functions relating to the approval of sworn auditors and the issuing of activity licences that so far were performed by the Ministry of Finance will be transferred to the competence of the Auditing Activities Oversight Board of the Board of Auditors. Also, the current control function of the Auditing Activities Oversight Board in audit quality assurance reviews and in disciplinary proceedings will be replaced with the function of directly conducting them, which means that the current three-tier-oversight system will become two-tier. In connection with these amendments, the principles of funding the oversight will be adjusted. Besides harmonisation with EU law, the proposed amendments will eventually shorten the processing processes, both reducing the administrative burden and saving costs.
The deliberation of a Bill was adjourned due to the end of the working hours of the Riigikogu:
The Bill on Amendments to the Traffic Act, the Road Transport Act and the Taxation Act (419 SE), initiated by the Government, will establish a road user charge for lorries. The framework for the road user charge for lorries has been established with the relevant EU directive on the charging of heavy goods vehicles for the use of certain infrastructures which will be transposed to the necessary extent with this Act.
The rate of the road user charge will depend on the gross laden weight, the EURO-emission class and the number of axles of the lorry and its trailer. The daily road user charge rate will remain between 9 and 12 euro, and the annual road user charge rate will remain between 500 and 1300 euro. In addition, it will be possible to pay the road user charge for a week, a month or a quarter.
Time-based road user charge means that payment of a specified amount will confer the right for a person to use a defined infrastructure with a vehicle for a given period. The road user charge for lorries will be established for using public roads with a lorry with a gross laden weight exceeding 3500 kilogrammes and its trailer. Vehicles of the Defence Forces, the Defence League, the armed forces of foreign states, the Police and Border Guard Board and rescue agencies and vintage vehicles within the meaning of § 83 of the Traffic Act will be exempt from the road user charge.
The Minister of Economic Affairs and Infrastructure Kadri Simson said that Estonia and Finland were the only European Union Member States who had not yet established the road user charge for lorries. “Application of the road user charge may bring 17 million euro per year into the state budget, and approximately 80 per cent of that would be contributed by Estonian lorries and 20 per cent by foreign lorries,” Simson said. She added that the proceeds from the road user charge into the state budget had to be specifically designated for the purpose of transport infrastructure maintenance.
Time-based and distance-based road user charges are used in the European Union. On the basis of the alternatives analysed in the study “The Possibilities for Implementing Transport Charges in Estonia”, commissioned by the Government Office in 2015, time-based road user charge for lorries will be established in Estonia as it has the advantages of a lower investment and maintenance cost and a system similar to those implemented in Latvia and Lithuania.
The Road Administration and the Tax and Customs Board will administer the charge. It will be the task of the Road Administration to ensure the possibility to pay the road user charge on a 24-hour basis, and the Act will give the Road Administration the right to enter into a contract under public law with a legal person in private law to create the possibilities to pay and to organise the possibilities to pay the road user charge. Possibilities to pay the road user charge on the Internet will also be implemented.
The Police and Border Guard Board and the Tax and Customs Board will exercise state supervision over the payment of the road user charge for lorries within the framework of the performance of their other functions. The Road Administration will also be given the right to exercise state supervision.
Video recordings of the sittings of the Riigikogu can be viewed at https://www.youtube.com/riigikogu
(NB! The recording will be uploaded with a delay.)
Your feedback is important. Please share it with us!