Study: Estonian pensioners are among the poorest in OECD countries

Pensioners in Tallinn (picture is illustrative).
Pensioners in Tallinn (picture is illustrative). Source: Siim Lõvi/ERR

Estonian pensioners are among the poorest when Organization for Economic Co-operation and Development (OECD) member countries are compared, a new survey shows.

The study, Pensions at a Glance 2019, shows Estonia has the second largest relative share of pensioners living in relative poverty after South Korea. While in South Korea approximately 44 percent of people over 65 live in relative poverty, in Estonia the number is 35 percent compared to the OECD average of 14 percent.

On average, 15.7 percent of people in Estonia live below the relative poverty line.

Estonia is also one of the countries where retirement life is the smallest part of people's life expectancy and will probably decrease even further in the future. 

On average in OECD countries, people currently entering the labor market are predicted to spend 33.6 percent of their lifetime in retirment and those who are already retired the average is about 32 percent. 

In Estonia, people entering the labor market are now expected to spend 25 percent of their lifes in retirement, while people who are already retired have a predicted retirement of nearly 30 percent of their lifetime. 

The expected length of time of retirement in Latvia, Lithuania, Poland, Hungary, Denmark, Ireland and Italy is even shorter than in Estonia. Estonia is also one of the few OECD countries where young people who will retire in the coming decades are expected to have a shorter retirement time than current pensioners.

Estonia has decided to raise the current retirement age to 65 years old in 2026, and in the future it will be linked to life expectancy, the OECD notes in its report.

Estonia is also one of the countries where unemployment is most affected by the size of future pensions. If a person has been unemployed for five years, his future pension will be more than ten per cent below the average in Australia, Chile, Iceland, Latvia, Korea, Mexico, Poland, Slovakia and Turkey, according to the report. In OECD countries, on average, five-year unemployment results in a 6.3 percent reduction in pension.

At the same time, Estonia is one of the countries where pensioners pay the lowest income and social tax on their income.

Estonia is lagging behind the OECD average in terms of public pension expenditure as a share of government expenditure. While in 2000 the average level of pension expenditure in the OECD was 16.3 percent and in Estonia 16.7 percent of total government expenditure, by 2015 the OECD average had risen to 18.4 per cent and the Estonian average had risen to 17.4 per cent.

At the same time, the OECD notes that Estonia, along with Lithuania and Slovakia, has increased the link between people's wages and contributions to retirement and the size of future pensions.

At the same time, the report also shows that Estonia has by far the smallest gap in pensions for men and women, approximately three per cent, while the OECD average is 25 percent and in Germany the gap is over 40 percent.

The OECD is an international organization of advanced industrialized nations that deals mainly with economic policy: general information exchange, data collection, statistical publication, economic analysis, and forecasting. The organization has 36 members.


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Editor: Helen Wright

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