Estonian ministry completes pension reform bill ({{commentsTotal}})

Pensioners lined up at ATMs.
Pensioners lined up at ATMs. Source: (Pärnu Postimees/Scanpix)

A pension reform bill has exited the Ministry of Social Affairs that would change the pension equation, peg Estonia's retirement age to its life expectancy beginning in 2027, and make pensions dependent on the number of years worked.

"The aging of the population places a task of great responsibility all of society in Estonia — to ensure on one hand a state pension that protects people against poverty in their old age, and to be sufficiently flexible on the other to be consistent with changes on the labor market," Minister of Social Protection Kaia Iva said in a press release.

"The pension system must guarantee necessary income which is not affected by a huge difference in wages," she continued. "We also need flexibility in order to both ensure the availability of workforce as well as opportunities for self-realization for the elderly."

Planned changes to the pension equation will not affect people who have already retired or pension shares that have already been accumulated. The flexible pension arrangement can be used by anyone interested.

The Estonian government at a Cabinet meeting in mid-January decided to proceed with making changes to the old-age pension and the pension equation, which means that in addition to a flexible pension and tying the retirement age to the expected average life expectancy beginning in 2027, the size of the first-pillar pension will depend on the number of years a person has worked.

In the future, people will be able to choose when they retire, receive a partial pension, stop their pension payouts and resume them at a better time. For the pension system to be in compliance with demographic developments and for it to be possible to pay pensions equivalent to current pensions in the future, the national old-age pension age would be pegged to the expected average life expectancy as of 2027.

The Cabinet tasked the Ministry of Social Affairs and the Ministry of Finance with drawing up the relevant bill and submitting it to the government in the first quarter of 2018.

During work on the bill, meetings were held the Estonian Trade Union Confederation (EAKL), white-collar union TALO, the Estonian Employers' Confederation and the Estonian Cooperation Council on Feb. 28, April 26, Sept. 12 and Nov. 7, respectively.

Estonia's population size is estimated to decline from the present 1.31 million to 1.11 million people by 2060, and the number of people between the ages of 18-63 is estimated to shrink by 256,000, or 32 percent. The number of people aged 63 and above, meanwhile, is estimated to increase by 106,000 or 41 percent.

Editor: Aili Vahtla

Source: BNS



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