A government-initiated bill of amendments to the State Pension Insurance Act, according to which an extraordinary €7 pension increase is to be implemented next April 1 in addition to the planned indexation-based pension increase, passed its first reading in the Riigikogu on Tuesday.
Under the new amendments, the base pension will increase by €7 in addition to the increase from indexation as of April 1, 2020. Monthly pensions are expected to increase by a total of €45, spokespeople for the government said on Tuesday, noting that next year's extraordinary pension hike will cost the state some €20.8 million.
The extraordinary hike in the base amount will apply to all old-age pensioners as well as people receiving pensions for incapacity for work or loss of a provider.
Pensioners not participating in the labor force will benefit most from the increase, which will involve some 330,000 people in all in 2020 and is estimated to reduce the share of people in relative poverty by 0.6 percentage point.
Every April, all pensions increase in size as a result of indexation. The value of the index is calculated to the extent of 80 percent based on the change in last year's social tax receipts and to the extent of 20 percent based on the change in the consumer price index (CPI).
Based on the Ministry of Finance's 2019 summer economic forecast, pensions to be indexed in 2020 will increase by approximately 8 percent on average, as a result of which the average old-age pension will increase €38. In order to increase pensions by €45, the base pension amount must be increased by €7.
The opposition has been critical of the government's extraordinary €7 pension hike as the Centre Party, the senior partner of the current government coalition, had campaigned ahead of the March 3 general election on the promise of an extraordinary pension hike of €100.
Editor: Aili Vahtla