Heads of ruling parties against changes to pensions indexing

The leaders of all three coalition parties confirmed on Thursday that they do not wish to alter the indexation of pensions to reduce budget expenses. However, they are open to discussing other proposals made by the Estonian Employers' Confederation to cut the state's fixed costs.
The Estonian Employers' Confederation proposed in a letter to the leaders of the coalition parties that the indexation of state expenses should be frozen until economic growth resumes or permanently restructured.
The employers pointed out that social expenditures (up by 31 percent) and healthcare costs (up by 17 percent) have grown the most compared to pre-crisis levels. "The increase in pensions resulting from indexation has been a significant driver of the rise in social expenditures, with extraordinary pension increases further exacerbating sustainability issues," the letter stated.
Prime Minister Kristen Michal (Reform) reiterated at a government press conference that he does not support cutting pensions. "There are various reasons for this. We have achieved our goals with pensions — people can manage with them. I am not willing to touch the pension index," he said, adding that other proposals from the confederation could be discussed.
Minister of the Interior and SDE leader Lauri Läänemets emphasized that the pension index would not be changed. "Telling people who have already completed their life's work to struggle now so we can improve the state budget at their expense is not fair. I cannot imagine taking away from a €700 pension or slowing its growth," he said.
Läänemets also noted that it is difficult to agree with proposals that would increase inequality in society.
Kristina Kallas, leader of Eesti 200 and minister of education, expressed agreement with employers on the need to curb the growth of the state's fixed costs, suggesting that the general indexation system should be reviewed. "But not at the expense of reducing pensions. That is something we will certainly not do," she said.
The calculation of the pension index takes into account changes in the consumer price index (20 percent) and changes in social tax revenue (80 percent). This means that when prices and wages rise more slowly, pensions increase at a slower rate. Pensions are indexed annually on April 1.
Last year, the average pension increased by 10.6 percent through indexation, reaching €774 per month.
--
Follow ERR News on Facebook and Twitter and never miss an update!
Editor: Marko Tooming, Marcus Turovski