The Ministry of Finance's Deputy Secretary General for Tax and Customs Policy Dmitri Jegorov on Thursday criticized changes to Estonia's pension system approved by the government that day.
"The Government of the Republic approved pension reform today," Jegorov Tweeted. I and my tax people at the Ministry of Finance are in clear opposition. The government is sending the signal to someone born in 2019 not to even consider going to university at 18 — go to work and you will have five more years of work experience. Rather, go after middle school — you'll have eight."
According to Jegorov, the pension reform will have a crushing impact on workers' motivation to work for declared wages. "For 19 years we have told people to think before accepting under-the-table pay," he noted. "Now we're telling them to forget it? Take €500 [in declared wages] and the rest under the table? The second [pension] pillar is already being demolished. I am simply speechless."
The Estonian government on Thursday approved updates to the country's current pension system which will change the formula used to calculate an individual's old age pension beginning in 2021. According to the changes, the number of years worked, not income earned, will affect the size of one's monthly pension under the the system's first pillar.
According to the plan, the transition period will last from 2021-2037, during which period half the size of the first pillar will depend on one's income level and the other half of the number of years worked. Already accumulated insurance entitlements, or the portion of the first pillar which depends on the size of wage, will not be transformed into solidarity-based entitlements. The relationship between wage level and pension payments will remain in the second and third pillars.
Changes to Estonia's national pension system have been in the works since 2015, when a work group for the promotion of the sustainability of the state pension system was formed that brought together interest groups and various institutions of the state.
Editor: Aili Vahtla