As a result of annual indexation and an extraordinary pension hike, the average old-age pension in Estonia is to increase over 9 percent, or by €45, from Wednesday.
Minister of Social Affairs Tanel Kiik said in a statement: "We have begun an extraordinary pension hike this year to reduce the risk of poverty of old-age pensioners and improve their wellbeing.
"As a result of indexation and the extraordinary hike, the average old-age pension will increase by €45. It is important that this year's extraordinary pension hike will help accelerate pension growth through indexation also in the coming years."
Merle Sumil-Läänemaa, adviser at the department of benefits of the Social Insurance Board, said that pension increases will vary after indexation according to the pensioner's previous work input.
The value of the index is calculated yearly to the extent of 80 percent based on the change in last year's social tax receipts and to the extent of 20 percent based on the change in the consumer price index (CPI).
Indexation increases both the base amount of pension and the value of one year of pensionable service. The base amount is the same for all recipients of pension and increases more than the value of a year of pensionable service.
Even though the value of one year of pensionable service increases slightly less than the base amount in percentage terms, multiplied by the part that depends on a person's length of employment, the former contributes more to the final sum of the pension hike - longer length of employment means a bigger increase and vice versa, Sumil-Läänemaa said.
Following indexation, the base amount of pension totals €208.5 and the value of one year of pensionable service amounts to €7.104. Additionally, the value of base amount is to increase from €208.5 to €215.5 as a result of an extraordinary increase of €7.
As a result, state pensions, the national pension excluded, will increase. Reindexed pensions will be paid out on Friday.
Following indexation, the old-age pension of a person with 15 years of pensionable service increases from €291.05 to €315.07 and together with the additional €7hike of the base amount totals €322.07.
The old-age pension of a person with 30 years of pensionable service increases from €390.46 to €421.63 and together with the additional €7 hike amounts to €428.63.
People with 44 years of pensionable service will see their old-age pension increase from €483.24 to €521.09 after indexation and to €528.09 with the extraordinary €7hike.
In addition to pension, the daily rate of work ability allowance is also recalculated - the value of the daily rate for a person with no work ability is €14.8 and the total work ability allowance is €446.7 per month starting from April 1, compared with €413 last year.
For a person with partial work ability, the allowance amounts to and €254.70 per month.
Editor: Helen Wright