Government approves clearer pension fund disclosures

The Estonian government has approved a bill to make information about pension funds clearer and easier to compare, while introducing wider changes for investment funds and their managers, ERR reports.

From June 2027, the current multi-page key information documents will be replaced with tables comparing pension funds by returns, fees and risk level, among other criteria. The information will also show the share of each fund’s investments in Estonia. The new format will be published on the Pension Centre website for second- and third-pillar pension funds.

A common method for calculating pension fund returns is planned to take effect in early 2028. It will account for a saver’s contributions and withdrawals, as well as when they were made, so personal returns are presented consistently across different channels.

Prospectuses for pension funds and other public investment funds will have to state whether, and to what extent, they use active or passive investment strategies. The government press service said this would help investors assess whether a fund’s policy fits their goals and evaluate its management fee. Passive strategies could be expected to carry lower fees.

The bill would also remove special rules for conservative pension funds and the requirement for fund managers to manage such a fund, giving managers more flexibility in setting their investment policies.

Other changes would allow managers of venture capital and real estate funds to issue loans using fund assets, though not to consumers. The bill would also let those funds hold assets with banks in other EU member states instead of local banks, potentially reducing custody costs.

New liquidity-management requirements are intended to help prevent crises. If many investors seek to leave a fund, managers could temporarily suspend the redemption of fund units or separate assets that have become difficult to sell from the rest of the fund’s assets. The stated aim is to protect investors.

The bill would also make it easier for funds with different legal statuses to merge. A fund that is a legal entity could merge with a contractual fund formed as a pool of assets, potentially reducing costs.