Government approves €45 pension raise ({{contentCtrl.commentsTotal}})

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

The Estonian government at a sitting on Thursday approved the average old-age pension is to increase by €45 with the extraordinary pension hike of approximately 8 percent.

The government approved the value of this year's state pension index at 1.080.

Also to be recalculated are benefits for incapacity for work, government spokespeople said. In 2020, the rate of national pension is to rise from €205.21 to €221.63 after indexation, while the base amount is to increase from €191.64 to €208.51 and the yearly rate from €6.62 to €7.1.

"This year, we started with an extraordinary increase in pensions to reduce the risk of poverty of old-age pensioners and improve their well-being. With indexation and the extraordinary increase in pension, the average old-age pension is to increase by €45," Minister of Social Affairs Tanel Kiik said.

"It is also important that this year's extraordinary pension hike will help speed up pension hikes with the help of indexation over the next few years as well. I consider it right that, along with wage growth, pensions are rising at a faster pace than before as well. I hope that the government will be able to continue with additionally raising pensions in the next few years as well," the minister added.

In accordance with the amendments to the State Pension Insurance Act, on April 1, 2020, the base amount of pension will be additionally raised by €7 after indexation. This means that the base pension is to rise from €208 to €215.

The cost of indexation of state pensions this year is €109.76 million. State pensions will be indexed for 327,925 pensioners. An increase of €7 for the base amount after indexation is to lead to total expenses in the amount of €130.22 million.

Estonia recalculates pensions every spring to keep pensions in balance with changes in salaries and prices.

An individual pensions is calculated for each person on the basis of their previous work contribution. The present system of indexation of pensions took effect from January 1, 2008 when the change in the index was pegged to the receipts of social tax to a bigger degree.

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Editor: Helen Wright

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