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Praxis: Raising Retirement Age Won't Eliminate Pension Deficit

Protesters in front of the Parliament building were against raising the retirement age.
Protesters in front of the Parliament building were against raising the retirement age. Source: Photo: Den za Dnjom/Scanpix

Parliament's decision last year to raise the retirement age to 65 by 2026 will not solve the problems of the pension system under the current scheme, a fresh study by the Praxis think tank found.

The portion of pensioners in Estonia will grow from 29 percent of the population last year to 40 percent by 2060, according to the study.

But raising the retirement age, currently 63 for men and 60.5 for women, will not be enough to curb the pension system deficit - which will grow to 1 percent of annual GDP by 2060.

If the system depends entirely on the growth of the social tax, the deficit may grow to 2.4 percent of GDP by then.

On the other hand, if funding were fixed to consumer prices, then costs would decrease signficantly in the long term. If funding were only partially dependent of consumer prices, the budget would be balanced in 20 years; if fully dependent, the budget would be balanced by 2020.

 

Ott Tammik

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