Ministers clash over using second pension pillar as collateral for home loans

Prime Minister Kristen Michal hopes a bill allowing the use of second pension pillar savings as collateral for home loans will reach parliament this autumn. However, Finance Minister Jürgen Ligi is highly critical of the idea, warning of rising prices and accumulated risks, despite Social Affairs Minister Karmen Joller claiming Ligi's fundamental support.

A clear disagreement has emerged in the Estonian government over the use of the second pension pillar: whether to allow people to use their pension savings as collateral for home loans. While the prime minister and social affairs minister consider the idea viable, Finance Minister Jürgen Ligi is firmly opposed.

Michal: bill could be debated this autumn

Prime Minister Kristen Michal said in the television programme "Prime Minister in Studio" that the finance ministry has analysed the matter and he believes the parliament could begin proceedings on the bill during the current autumn session. "The bill concerning the possibility of using the second pillar as collateral for housing could indeed be tabled during this [parliamentary] term and hopefully debated in the autumn. This alongside an increase in single parent support," he said.

The idea comes from Social Affairs Minister Karmen Joller's family confidence action plan, which she presented last week. The plan envisioned the possibility of using pension savings both as collateral for housing loans and to cover own contributions. According to the action plan, the deadline for implementing the change is 2028.

Joller talks of Ligi's support; Ligi says otherwise

Last Friday, Joller noted in the Vikerraadio programme "News+" that the future of the proposal depends on how it is assessed by banks and the finance ministry. When asked whether this meant that Ligi disagreed with the idea, Joller answered in the negative: "He does agree in principle, but we just need to think through the various risks and benefits, and how to implement it in practice."

Finance Minister Jürgen Ligi, however, expressed a quite different position on Tuesday in parliament. "Firstly, stimulating housing loan demand in this way ultimately raises prices and at the same time there are risks both in the housing market and at retirement age. I do not approve of this, but I am aware that such an initiative is in parliament, and we will assist technically," he said.

Ligi: the market is already overheating

Ligi pointed out that the Bank of Estonia has expressed concern about rapid growth in housing loans, with loan volumes already growing 10 per cent annually, suggesting market overheating rather than a shortfall. He compared the situation to a reduction in gambling tax: the finance ministry can offer technical assistance if the coalition so wishes, but the minister himself will not endorse such a proposal.

"Pension risk is very different from this and these things should not be confused. The whole point of savings pension is that we do not deploy it for the market simply to cover short-term decisions," Ligi emphasised. In his view, housing loan support should be a regional policy measure, not a general tool.

Ligi added that if risks accumulate in the market, the Bank of Estonia will likely introduce new own contribution requirements. "I do not see how they would not tighten own contribution possibilities if these risks materialise," the minister acknowledged.