This paper provides a description of the reform of the Estonian pension system with a focus on the operation of the new funded scheme. One interesting aspect of the Estonian funded scheme is that it involves centralised contribution collection, account management and record keeping. The Tax Board collects contributions while the Central Registrar for Securities houses the central database where all information on members, their choices, and transactions is gathered. The mandatory pension funds are also protected with a guarantee fund that covers losses in the event of bankruptcy of the fund manager or losses generated by violations of regulations. After one year of operation of the industry, the fund industry shows patterns that are typical in other countries that have introduced such schemes, in particular a high degree of market concentration and investment portfolios invested predominantly in bonds...