How much tax is due on a second-pillar withdrawal?
Two different rates — and the gap is more than double. Taking money out of the second pillar before pension age costs 22% income tax. At pension age, taking the whole sum as a lump sum costs 10%. The same 10% applies where fewer than five years remain until pension age. And one rule people miss: if you want to use second-pillar money before pension age, the only option is to withdraw the entire amount at once and pay 22% on it — partial withdrawals do not exist. One more thing: second-pillar payouts do not reduce your tax-free allowance.
📋 The rules
- Before pension age: 22% income tax
- At pension age, lump sum: 10%
- Also 10% if under 5 years to pension age
- Before pension age — the whole sum only
- Payouts do not cut the tax-free allowance
🔓 Exceptions
- With under five years to pension age the 10 percent rate also applies
- Before pension age money can only be taken as a single full withdrawal
- Payments to heirs follow their own taxation rules
⚠️ Penalties & fines
Twelve percentage points is the price of impatience. Money taken out before pension age is taxed at 22%, while at pension age it is 10% — more than double, and it comes straight out of your savings. And you lose compounding: money that would have grown for decades stops growing the day you withdraw it. Mind the technical limit too: before pension age you cannot take part — only the whole sum at once — so “just a little” is not an option. If you are planning to leave, do the arithmetic: the closer you are to pension age, the more the exit costs you in tax alone.
📎 Official sources
- Pensionikeskus · Second pillar →
- Tax and Customs Board · Pensions →
- Riigi Teataja · Funded Pensions Act →
❓ Frequently asked
What is the tax before pension age?
Taking money from the second pillar before pension age is taxed at 22 percent. It applies to the whole sum withdrawn, since partial withdrawals are not possible before pension age.
What is the tax at pension age?
Taking the whole sum at once at pension age is taxed at 10 percent. The same rate applies where fewer than five years remain until pension age.
Can I take out part of the money?
Not before pension age. The only option is to withdraw the entire amount at once and pay 22 percent income tax on it, so a partial withdrawal is not available.
Does a payout affect my tax-free allowance?
It does not. Second-pillar payouts taxed at 22 or 10 percent do not reduce your tax-free allowance, which is good news where larger sums are involved.
Is leaving the pillar sensible?
It depends on the arithmetic. The tax difference is more than double and withdrawn money stops growing, so calculate what you lose in tax and future returns before deciding.
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