Dear Tuleva members and investors,
The year 2024 was marked by three significant milestones. First and foremost, we, as savers, once again managed to increase our contributions: together, we set aside 130 million euros from our salaries over the year, and more than 14,000 people decided to raise their contributions to the second pillar. Second, our assets surpassed the 1 billion euro mark, allowing us to lower fees once again. And third, we pursued a fair resolution through the courts regarding the amount of the fine imposed on us at the start of the year.
We, the investors of Tuleva, have done very well in recent years
For most of us, the assets in our pension accounts have grown substantially over the past three years. While three years ago, only 4,000 people had accumulated more than 25,000 euros in the second and third pillars, that number has now risen to 14,000. Additionally, we now have 4,900 people with assets exceeding 50,000 euros – a significant increase from just 1,000 people three years ago. (1)
Our formula for success is simple: start saving early, contribute as much as possible, and ensure your assets earn a fair return (in Estonian). However, this is easier said than done. Sure, everyone wants to secure their own future and that of their loved ones, but many are unwilling to do so at the expense of their current financial comfort. As a result, most people end up saving less than they actually need. (2)
Our goal is to support one another in saving consistently for the future while making the most of the opportunities provided by the second and third pillars. Although we can’t contribute directly to one another’s funds, we can make saving easier and more effective by sharing experiences, encouraging one another to take the necessary steps, and leveraging the economies of scale from pooled pension funds to secure favourable terms for saving.
Today, Tuleva has over 77,000 savers. Many are just starting their savings journey, but an increasing number are saving with real determination, contributing at least 16% of their monthly income to our funds.
Our goal is to reach 100,000 determined savers by the end of 2027. Last year, we made strong progress towards this target. Over 28,000 people began contributing to the third pillar or increased their current contributions, while more than 14,000 Tuleva savers raised their second pillar contributions. As of the beginning of this year, we already have 6,641 people whose savings rate places them firmly in the determined savers group, up from 4,200 a year ago.
What particularly pleases us is the number of people who increased their contributions to the second pillar. The best way to remain committed to saving is to make it automatic. The contributions to the second pillar are deducted before the salary is paid out, so the saver doesn’t have to rely on self-discipline or memory. What’s especially encouraging is that most of the 14,000 savers who raised their contribution rate opted for the maximum of 6%. Higher contributions will be reflected in the pension accounts in February (in Estonian).
Collectively, we saved a substantial amount last year – 130 million euros. Of this, we transferred 75 million euros to the third pillar, meaning that in the spring we’ll receive 15 million euros back from the stas as income tax refund.
Another significant contributor to our asset growth was investment returns. Last year, global stock markets rose by 25%, and over the past five years, the average annual return has been 11%. Considering the historical performance of financial markets, it is highly likely that there will be future years and even five-year periods with negative returns. However, the best long-term results will be achieved by those who don’t attempt to predict market fluctuations but instead focus on avoiding unnecessary fees and resist the temptation to move their assets out of the stock market into deposits simply due to their fund manager’s concerns. (3)
How do we grow?
We ended the year with 64% more assets than at the start of 2024. Contributions and asset transfers by new savers increased Tuleva’s assets by 36% over the year, while withdrawals by those leaving the second and third pillars or switching to other funds reduced our assets by 5%. This growth rate aligns remarkably closely with the projections in Tuleva’s 100,000 savers strategy from two years ago, demonstrating that, at best, you achieve what you dare to dream.
In November last year, the volume of our funds surpassed 1 billion euro mark, and we began the new year with 1.1 billion euros in assets. This growth was driven not only by strong global market returns but also by contributions from savers, redirected assets from new savers and a very small number of savers leaving our funds.
Last year, current and new savers brought 101 million euros to our funds, transferring assets previously invested in other pension funds or insurance contracts. In total, more than 80,000 Estonian pension savers made exchange transactions with their second pillar assets last year, and Tuleva welcomed nearly 6,800 of them. The key driver of our rapid growth, however, is loyalty: once we as savers choose Tuleva, we stick with the choice, even if the next salesperson in a shopping centre or bank lobby tries to win us over.
During each 4-month exchange period, less than 1% of the assets in our second pillar funds are withdrawn through exchange transactions. In contrast, the remaining fund managers lose between 2.5% and 7% of their assets in this way.
This provides us with a significant cost advantage. Most fund managers spend millions of euros annually to attract new customers, relying on costly armies of salespeople. Unfortunately, they lose a comparable amount each year due to asset outflows from departing customers. Banks’ fund managers often claim that their high expenses are driven by the high cost of active asset management. However, it’s the need to sustain these expensive sales teams (in Estonian), coupled with their modest performance due to high customer turnover, that truly makes their operations costly. (4)
This is why our funds continue to grow while others remain stagnant. Tuleva’s market share among Estonian pension funds has doubled over the past three years. At the beginning of 2025, we narrowly overtook SEB, which had been the third-largest fund manager in the market.
Larger volume → lower fees
The growth in assets enabled us to reduce fees once again. At the same time, we took the opportunity to simplify our fee structure: all our funds now have a uniform ongoing charges rate of 0.32% per year. In addition to this low fee, for Tuleva members investing with us is even more advantageous than these fees suggest. Each Tuleva member will receive 0.05% of the value of the assets accumulated in Tuleva’s second and third pillars as a membership bonus every year, credited to their personal member capital account.
The bar representing Tuleva is a single colour, reflecting the consistently low fees across all our funds. This ensures that Tuleva savers can confidently avoid the risk of inadvertently choosing a fund with significantly higher fees after seeing an advertisement for a low-fee fund.
How to talk honestly about pension funds?
At the beginning of last year, we appealed the Estonian Financial Supervision Authority’s decision to fine Tuleva 100,000 euros for shortcomings in our advertising. The court ruled that while our advertisements had deficiencies, the fine was disproportionate and reduced it by six times.
This dispute was far from easy for us. We would much prefer to avoid legal disputes altogether, especially with the state or regulatory authorities. In the financial sector, it’s common for companies to pay substantial fines without admitting their liability. This approach allows them to avoid lengthy and costly litigation while preserving their reputation. However, such settlements often leave the public uncertain about whether justice was truly served.
This is why we chose to challenge the Financial Supervision Authority’s decision in court. The court agreed with the Authority that we had violated advertising rules. This is painful to acknowledge. We admit that we wanted to do too much too fast. We had already changed our communication practices in 2023 to prevent similar mistakes in the future. However, the court, like many Tuleva members, found that the fine was disproportionate given the minor nature of our offence, and therefore significantly reduced its amount. The judgment, however, has not yet entered into force, as the Authority has appealed to the Supreme Court.
We hope the judgment will help improve communication activities of all fund managers. Notably, the court emphasised that information about pension funds must be easily understandable to all savers. Financial service advertisements in general need to be clear to the average saver, but given that nearly everyone saves in pension funds, the threshold for simplicity is even higher. This principle aligns with our own tasks, set out in Tuleva’s articles of association, to make saving an activity that is easily understandable for everyone in Estonia.
Our dispute may have also contributed to the Ministry of Finance taking steps to simplify how pension fund information is presented. A recent analysis (in Estonian) proposes replacing the complex and formal key investor information document with a straightforward and universally understandable comparison table. More importantly, the Ministry intends to introduce a requirement for individuals to be able to view their personalised annualised rate of return in their internet bank. We have repeatedly highlighted that the current presentation of returns in internet banks is far from transparent (in Estonian).
Tuleva has a new Supervisory Council
Last year, we elected a new 10-member Supervisory Council for the Association. This is the third configuration of our Council. Of Tuleva’s founding members, Kristo Käärmann, Loit Linnupõld and Indrek Kasela will continue serving on the Council. In addition, the founders elected Priit Lepasepp, who previously served on the Association’s Management Board, to join the Council. Another member who will continue her role from the previous Council is Kristi Saare.
The other five members are newcomers to the Council. Kadri Lainas, Johanna Ambre, Riin Mäesalu, Kirti Rebane and Marit Finnie have all been Tuleva members for years and are actively saving their second and third pillar assets with us.
The main task of the Council is to ensure that Tuleva remains true to its mission: to help people build their future capital with confidence by putting money aside on a regular basis. The Council approves the key terms and conditions of our funds, including fees and investment strategy. What better way to ensure that our fund manager acts in the best interests of savers than to place oversight in the hands of a Council elected by the savers themselves?
You can find a summary of the work of the previous Council here (in Estonian).
Our financial results were strong
According to preliminary estimates, we earned approximately 466,000 euros in EBITDA last year. After accounting for depreciation of 54,000 euros, the remaining amount represents profit from our business activities, which is split into two parts: 155,000 euros as a membership bonus for Tuleva members and 257,000 euros as operating profit. Since Tuleva’s foundation, we’ve earned a total of 888,000 euros in EBITDA.
It’s no coincidence that last year’s EBITDA exceeds the combined EBITDA of all previous years. In 2022, in line with Tuleva’s new strategy, we decided to expand our team and invest heavily in growth. The investment made reduced our EBITDA in 2022 and 2023. While the success of growth investments is never guaranteed, the results from the past year confirm that the investment is beginning to pay off.
In addition to business profits, the owners of our membership capital also earn investment returns. Indeed, our capital is primarily invested in the units of our own pension funds, and their value increased by 1.5 million euros over the past year. Since 2016, the membership capital has earned a total of 3.7 million euros in investment returns.
Following the auditor’s advice, we made a retrospective adjustment to the 2023 reports by recognising part of the work contribution expense planned for 2024–2026 in the 2023 budget. This increased the 2023 work contribution expense by 105,000 euros. (5)
As in previous years, the reports will be prepared during the first quarter and then sent to all Tuleva members for approval at the general meeting. The annual report is currently undergoing audit.
Investments in 2025: a new savings product and optimised payouts
In 2025, we’ll continue investing in Tuleva’s growth. Alongside our regular work with the second and third pillars, we plan to launch two new projects. In the coming months, we intend to apply for an activity licence for an additional savings product, and establish a proper payouts system.
Let’s begin by outlining the first project. For most people, securing their future through the second and third pillars with tax relief is sufficient, but not for everyone. Every year, more individuals are taking full advantage of the third pillar. There are also many who are looking for reasonable options to invest in index funds through their company or even on behalf of a child.
While several companies now provide the option to invest in broad-based low-fee index funds, we consider the process too complicated. In most cases, these broad-based low-fee index funds are offered alongside dozens – if not hundreds – of less advantageous options. Too much choice can be overwhelming, so money often just sits on deposits.
Therefore, Tuleva members have repeatedly asked us when we’ll create an additional fund outside the pension system. For this, we require an additional activity license. At the end of last year, we began work on this project and started preparing an application for the necessary license. We will submit it to the Financial Supervision and Resolution Authority in the coming months. If everything goes as planned, we could have a new fund up and running by the end of the year.
Finally, let’s outline the second project. Until now, we have focused solely on saving and left the payouts for the future. After all, it’s logical – if nothing’s been saved, there’s little point in dedicating much time to considering payouts. Now, however, the time has come to turn our attention to them.
Most people withdraw their accumulated assets from the second and third pillars as a lump sum when they reach the age of 60–65 years, paying a 10% income tax on the amount accrued to the state. At the same time, many continue working and, in fact, have no immediate need to use their pension assets. How can we help people decide more wisely about when and how they use their savings? After all, the law doesn’t require withdrawal of funds upon reaching retirement age, and it also provides for the option to use the savings without paying income tax in the form of a funded pension, i.e., through monthly payments.
Currently, there are still relatively few people aged 60 and older among Tuleva savers, but it’s certain that their number will increase in the coming years. This is why we already developed the first version of a payout solution (in Estonian) last year. However, work on the payouts is still at an early stage. Just as we have observed and learned how people make decisions when they start saving, we now need to understand how they reach the decision on how to use their savings. Additionally, we need to help savers make more informed and profitable choices for themselves.
(1) We chose the threshold of 25,000 euros for the simple reason that this amount has some tangible impact at retirement. If you are 65 years old, have 25,000 euros in the second and third pillars, and decide to retire, you would receive a monthly payment of more than 100 euros from your pension funds. See the payout calculator (in Estonian) for details.
(2) This statement is based on several assumptions. We don’t really know how much money we will need in the future, and even if we did, it’s difficult to determine with sufficient certainty how much we should save for it. The Foresight Centre of the Riigikogu (Estonian Parliament) has estimated that to secure a reasonable income at retirement age, a person should save 15–20% of their income throughout their working life. However, only a small portion of the Estonian population is able to achieve such a savings rate (see, for example, the analysis of the sustainability of the pension system (in Estonian)).
(3) As an indicator of global market returns, I use our funds’ benchmark index MSCI ACWI, measured in euros. You can find a summary of the annual performance of this index here. For long-term historical returns on the stock markets, I rely on data from the Dimson, Marsh, and Staunton database, with their annual reviews available here.
(4) The fund managers’ reports will be published only in March–April. My assessments are based on previous years’ reports, which I have regularly summarised on the blog (in Estonian).
(5) Our previous policy was to recognise the work contribution expense in the reports when the employee became entitled to it. Our contracts specify the total work contribution amount for three years and the timeline for entitlement. Usually, employees become entitled to the first portion after 12 months (if they leave earlier, they forfeit the contribution), with the remaining parts vested in subsequent years. The auditor recommended applying the IFRS standard, which requires most of the expense of a three-year contract to be provisioned in the first year.
