Coalition parties have not agreed on funding source for pension rise

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

While coalition parties agree with raising pensions in principle, they have said it depends on the source of funding and sustainability. Discussions will continue this week.

On Tuesday, Prime Minister Jüri Ratas (Center) told ERR the increase in the pension could exceed at least inflation, which will be 1.4 percent according to the forecast. The extraordinary pension increase is an important topic in state budget discussions which are taking place this week.

The Center Party promised to raise pensions before the last election and although figures will not be discussed at the beginning of the debate, Minister of Social Affairs Tanel Kiik (Center) has confirmed that an application for funding has been submitted, ETV's evening new show "Aktuaalne kaamera" (AK) said on Tuesday.

Kiik said: "We know Estonia's average pension is low compared with salaries in the European context. We know that we need to move forward here, and we also know that in the light of the latest forecasts, conventional indexation would not bring any significant increase, as less social tax has been paid."

Every 10 euros of extraordinary pension increase would cost the state about €30 million, AK reported on Wednesday.  

Kiik said part of the pension money should be returned to the state treasury through taxes. At the same time, raising pensions would lead to other additional costs.

"For example, the state also pays health insurance for elderly non-working old-age pensioners. I think that it is also important that the Health Insurance Fund's budget does not fall in the coming years," Kiik said.

Chairman of the Isamaa Helir-Valdor Seeder said the party supports the idea but it depends on the sources of funding and should not come from loan money.

Seeder said the base part of pensions will receive the increase and it would become a permanent expense.  

"If it is not done at the expense of loans, i.e. if it is not a sustainable solution, so to speak, but it must be a sustainable solution so that we can continue to pay pensions in the coming years," Seeder said.

Minister of Finance Martin Helme (EKRE) said the extraordinary pension increase is one of the biggest topics in the discussions surrounding the state budget which started on Tuesday. How much money can be allocated for this is not yet clear. 

However, Helme said that which expenses are paid from the state budget at the expense of the loan and which will be paid from tax revenue is not so important.

He said the state budget has a revenue side, and if it is not large enough to cover current expenses, it is necessary to take out a loan. 

Discussions on the state budget will continue in the government throughout the week.


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Editor: Helen Wright

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