Centre minister, opposition MP go head-to-head on pensions increases

Jaak Aab (left) and Aivar Sõerd on Thursday's Esimene stuudio with ERR's Andres Kuusk in the chair.
Jaak Aab (left) and Aivar Sõerd on Thursday's Esimene stuudio with ERR's Andres Kuusk in the chair. Source: ERR

Differences of opinion on pensions increases resulting from the state budget unveiled on Tuesday came up in Thursday evening's edition of ETV's Esimene stuudio political discussion show.

The state budget for 2020 made a provision to increase the average old-age pension by €45 per month, comprising a €38 increase plus an "extraordinary" increase of €7.

Public administration minister Jaak Aab (Centre) said that the latter was a step towards his party's pre-election promise of a pensions increase of €100. However, opposition MP and former finance minister Aivar Sõerd (Reform) said that the hike was a negligible proportion of what had been promised.

"Whether we are all happy about any decision is a matter for ourselves, but this is a step towards what we have promised, and certainly we will not put that promise to one side," Aab said.

In response, Sõerd said that: "You also have an income tax liability with that seven euros. €28 euros above €500 [i.e. the increase over the threshold] will be taxed. Income taxes have always been set up in order to ensure that the average pension is not tax-deductible. However, from that €28, €.5.60 comes in income tax, leaving €1.40 [from the €7 extraordinary hike]. So let's talk about the other side of the story, and don't write it off against your €38 indexation pension increase, this still comes from the economy and wage growth as the index expects."

Aab countered by saying that every extraordinary pension increase is an addition. He asked Sõerd instead to answer why the Reform Party, when it was in office, had not made extraordinary increases in pensions at a time when the pension index did not rise at all, noting that one way or another pensions would increase.

"[Pensions] still go up. It depends on the size of the pension. If we look at the total increase, with indexation, /.../ then it stands at €545. From this, €9 are lost from €45. So actually, this increase is still an increase," Aab said.

Sõerd also called on the coaltion to support a Reform Party bill which passed its first reading at the Riigikogu Thursday and whic exempts middle pension income tax.

"In fact, this €500 treats everyone equally: Working people, working retirees and simple retirees. But we have not rejected attempting to make the average pension tax-free in the future. We are ready to rule the country properly for four years, and we will come back to these issues next spring," Aab responded.

The original article and Esimene stuudio clip (in Estonian) is here.

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Editor: Andrew Whyte

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