Prime minister: Supreme Court ruling brings legal clarity to pension reform

Prime Minister Jüri Ratas (Center).
Prime Minister Jüri Ratas (Center). Source: Siim Lõvi /ERR

The Supreme Court's rejection of a presidential challenge to the pension reform bill had brought legal clarity on the issue, Prime Minister Juri Ratas (Center) said Tuesday.

"I welcome today's Supreme Court decision, which brought legal clarity on the topic of the pension reform," Ratas said. "I thank the court for its in-depth and well thought-out approach, and acknowledge the president for initiating this case."

Ratas said the reform, which would ostensibly given pension holders more control over their pension funds, and bring it away from the state and employers, was a significant development.

"Those who are satisfied with their choices to date do not have to do anything, and those who now wish to join the second pension pillar can definitely still do so," Ratas said, referring to membership of the so-called second pillar of the Estonian pension system being, under the new law, voluntary, whereas it had been mandatory for most wage earners since 2010.

The second pillar deals with employer/employee contributions, as distinct from the first pillar (state pension) or third pillar (private pension schemes).

The president opposed the bill on the grounds that it would treat people differently depending on whether they were in the second pillar or not, which she said was unconstitutional.

Critics of the bill in general, including head of the Bank of Estonia Madis Müller, said it would cause harm to the economy over time, not least because pension pots would be getting smaller at a time when the population is getting older.

The Supreme Court, while it said the bill infringed on some property rights, ruled that the law was not unconstitutional on Tuesday.

Ratas said that being able to survive through old age is a fundamental right of the people of Estonia nonetheless, and must be thought through.

"Today's decision gives one road sign for that, but we definitely must keep on working - which means both finding means for a pension rise as well as well thought-out steps in the implementation of the reform of the second pillar in order for the dangers highlighted in the decision of the Supreme Court not to materialize," he said.

Isamaa chairman: Estonian people deserve right to make their own decisions

Leader of the Isamaa party Helir-Valdor Seeder said that the required clarity has finally been achieved and starting from next year, people will have the right to make their own decisions regarding their money.

Seeder called the pension reform Estonia's biggest reform of the decade.

"It was Isamaa's fundamental objective to grant people the freedom and right to make their own decisions in terms of their money. In the wake of today's Supreme Court decision, we can now achieve this goal," Seeder said.

The leader of Isamaa agreed with the position of the Supreme Court according to which the objective of the reform to increase people's freedom of choice outweighs its possible infringements.

"The economic freedoms of people are the guarantee of the success of Estonia's regained independence; they will help us attain a more active and successful society as a whole," Seeder said.

Reform MP: Dismantling Estonia's pension system very bad idea

Reform Party MP Andres Sutt, member of the parliamentary finance committee, has described the implementation of the law on the reform of mandatory funded pensions as dismantling of the Estonian pension system and as such a very bad idea. 

"The Supreme Court has made its decision and the constitutional dispute over the second pillar is thus over. The decision of the court must be respected, and the president already promulgated the law," the opposition MP said.

"However, I still hold the position that dismantling our pension system is a very bad idea. Monetary and financial problems will continue in the future. The Estonian population is ageing, and without mandatory funded pensions the Estonian pension system is not able to ensure people's coping in retirement age," Sutt said according to spokespeople for the Reform Party.

He said that as a result, pensions will be smaller in the future and the at-poverty risk of pensioners will grow, not decrease in the future. Relinquishing mandatory funded pensions will mean in the future either a steep increase in social tax or many times bigger immigration.

"In this way, a tax increase will await our children and grandchildren, and ever increasing retirement age coupled with smaller pensions will await us," he said.

"With the abolition of mandatory funded pensions a deep crack has been created in the trustworthiness of the state pension system. Can I trust my state is a justified question. I will continue to accumulate money in both the second and the third pillar, and I advise everybody who cares for their children and genuine freedom in their old age to do it," Sutt said.

SDE: Buying off voters with their own money current political reality

Social Democratic Party (SDE) and former long-time parliamentary speaker Eiki Nestor said that taxes payable by our children and grandchildren will be higher that those paid today and elderly people' ability to cope will deteriorate even further in the future, which is likely what the people who are currently in power are striving for.

"The Supreme Court has decided that if the government seeks to cause problems in the long term for the people living here, they have the right to do so according to the Constitution. The current government's role models are Hungary and Poland which went down that path and are now struggling," Nestor said.

"I apologize to the Supreme Court, but calling on the executive and legislative powers to monitor the situation is naive in my opinion. Buying off voters with their own money is the real political life. If anyone came up with the idea to do away with the mandatory pension insurance altogether, that, too, would be constitutional, according to the logic of today's decision," Nestor said.

"I would also like to thank the members of the Supreme Court who dissented," he added.


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Editor: Andrew Whyte

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