A survey commissioned by Luminor has shown that a fifth of Estonians do not save for retirement. The main reason for not saving is the belief that, despite all efforts, inflation will eat away at the value of the money they would otherwise save for retirement. The largest share of respondents (60%) save money in the second pension pillar. A third of respondents have also joined the third pillar to save for retirement, and a quarter increase their money by investing directly in shares and bonds. According to Vahur Madisson, a fund manager at Luminori pensionifondid, it is worrying that, according to the survey, 20% of respondents do not save for retirement at all. Of those who do not save money, 39% named the lack of prospects for saving for retirement as the main reason, since inflation reduces the value of money. A quarter do not save money because they have not thought about it. 12% have given up saving because they believe that the state pension will provide sufficient income, and 8% do not plan to retire. The survey also revealed a correlation with the level of education of respondents – the higher the level of education, the more likely it is that a person will save for retirement. 52% of people (more than half of respondents) with a basic education do not save money for retirement, and every fourth person with vocational and secondary education does the same. At the same time, only about every tenth person with higher education (11% of respondents) does not save money for retirement. Pension fund manager Luminor notes that the age group 40-49 stands out among the obvious non-payers of pensions, with 57% of them citing inflation as the main reason for refusing to save for old age, which, they say, “will eat up their savings.” At the same time, only 4% of those over 40 who do not save believe that the state pension will be enough for them. “It is understandable that the economy and rapid inflation have made some people more sceptical about investing. However, it is worth remembering that in Estonia, inflation has exceeded wage growth only four times out of the last 20 years. The average return on stock markets is 7% per year, and inflation has exceeded this figure only three times in the last 20 years,” explains Madisson. He added that, in hindsight, the long-term effect of rising wages, profitability and compound interest has still allowed savers to increase their assets significantly. “If a 42-year-old saves 250 euros a month, then with an average return of 7% on their investments before and after retirement, by the age of 65 they could have around 1,000 euros a month in today’s money to supplement their income for the next 12 years, in addition to the state pension,” said Madisson. The survey found that the main reason why young people do not save for retirement is that they have not thought about it (43%). “Young people are generally advised to invest somewhat more riskily, and if they start investing in their twenties and do so consistently, they have a better chance of living a financially secure old age,” said the head of pension funds at Luminor. According to Madisson, pension funds are also a good investment option for ensuring a dignified old age thanks to state incentives: the state contributes 4% of a person’s salary to the second pillar from the social tax paid on their income. In addition, third pillar contributors receive a tax deduction on contributions of up to 15% (maximum 6,000 euros) of their gross annual income. In April this year, research company Norstat conducted a survey on pension savings in all three Baltic countries at the request of Luminor. In Estonia, 1,003 people aged 18 to 65 were surveyed. Read RusDelfi wherever it is convenient for you. Follow us on Facebook, Telegram, Instagram and even TikTok.