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Center, IRL support extra pension boost, SDE against it

24.4 percent of Estonia's population were at risk of poverty or social exclusion in 2016.
24.4 percent of Estonia's population were at risk of poverty or social exclusion in 2016. Source: (Siim Lõvi/ERR)

In addition to the planned indexing of pensions, Prime Minister Jüri Ratas (Center) believes that pensions should also be given an extra boost of €60-70. While Pro Patria and Res Publica Union (IRL) chairman Helir-Valdor Seeder supports the idea, Social Democratic Party (SDE) chairman and Minister of Health and Labour Jevgeni Ossinovski is not in favor of the hike.

"The planned April 1 pension increase will be 6.3 percent, with which the pension will increase from €416 to €442," Ratas said on Vikerraadio on Tuesday. "But what I and also the Center Party are saying is that another €60-70 should be added on top in order to lift the average old-age pension out of relative poverty."

While there are currently no fresh statistics on relative poverty, based on 2016 statistics, 276,000 people, or 21.1 percent of the population, lived in relative poverty in Estonia, and the prime minister believed that among them are a high number of pensioners.

Center Party Secretary General Mihhail Korb told regional daily Lääne Elu last week that one of the Center Party's most critical campaign promises ahead of the 2019 Riigikogu elections may end up being an extraordinary €100, or 25-percent, pension increase, to be realized in 2019 or 2020.

Ratas admitted that additional costs such as an extraordinary pension increase require additional funding, but that the solution is not simply a matter of redistributing existing funds.

"My role as prime minister is to act to ensure that more foreign investments are attracted to Estonia and that our economy does better," he said.

Seeder: If we find the funding, why not?

Seeder told ERR that IRL welcomes discussion on the matter.

"If a source [of funding] is found, why not?" he asked. "We need to look at what our options are. IRL is prepared to discuss the matter. We support the increasing of pensions if an agreement can be reached and the financial resources found between various political forces."

In any case, Seeder found, the proposal is worth discussing. "How Estonia could sustainably increase low pensions and find a permanent source of funding for it — this is not only an issue in the context of the next Riigikogu elections, but rather needs to be discussed in principle," he added. "Espeically those pensioners who did not benefit at all from the tax reform, who receive a pension of €300-400 — how to improve and increase their welfare certainly merits discussion. But this should not be done by increasing pensions but not substantially discussing — or trying to seek solutions for — where this money will come from."

According to the IRL chairman, pensions should not automatically be increased uniformly across the board; rather, those who receive smaller pensions should be helped first and foremost.

He also found that Estonia's entire pension system as a whole should be reconsidered, and named current payments into pensions' required second pillars, which accounts for more than €300 million per year in state spending, as a potential source of funding for pension increases.

"This is essentially setting money on fire, when you consider our future," Seeder said. "And we should seriously consider making the second pillar voluntary for people. Then you'll see how many people there really are who want this second pillar. I am positive that a large part of the population would abandon it, and that would free up money that we could direct toward either long-term infrastructure investments, the development of the education and healthcare system or the increasing of current pensioners' pensions."

The IRL chairman believed that a ten-percent pension increase would be feasible. "If you remotely consider any sort of realistic pension increases, then I believe that ten percent would be doable," he said. "But what I have in mind is above all differentiated — that the increase would be bigger for recipients of smaller pensions and smaller for those of larger ones."

Ossinovski: Increase would mean pension reform

Ossinovski, however, did not support the Center Party's proposed pension hike. In his opinion, the focus should be not on increasing pensions, but rather ensuring services and decreasing expenses for pensioners.

"This would mean a fundamental reform of the current pension system," Ossinovski said in an interview with Toomas Sildam on Tuesday. "If, according to the current system, pensions rise in accordance with increases in social wealth, Social Democrats do not support changing this system."

The chairman of the SDE commented that the Center Party has been the target of criticism as a result of the tax reform, and so the Center Party found it necessary to provide an important segment of its voting base with positive messages.

He also did not know how to respond when asked where the up to €500 million per year needed to fund the Center Party's proposed pension increase should come from.

"It is clear that the cost is enormous; this is naturally the social choice," Ossinovski reflected. "Is the most burning, complicated issue in Estonian society today the size of pensions, or is it something else? And of course this is the Center Party's legitimate and political position — they will have to propose sources of funding for it, whether it is increasing the percentage of income tax or something else."

According to Ossinovski, the strength of Estonia's pension system has laid in the fact that the size of pensions has not been the subject of political struggle. "Political parties no doubt have the right to break with this tradition, however," he added.

Reduce costs, not increase pensions

Social Democrats are interested in supporting pensioners by ensuring them access to services and reducing costs, not increasing pensions, Ossinovski said.

"The fact that our pension system has ensured that almost no pensioners live in absolute poverty is very positive; the system has worked," he explained. "On the other hand, it is clear that, when asking whether today's old-age pension is high enough, of course we would want a higher [pension]. And the Social Democrats' approach has tended to be along the lines of considering where we can offer the elderly more services and reduce their costs."

Editor: Aili Vahtla

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