Estonian PM: Pension to grow 8 pct through indexation, extraordinary hike still pending

  • 2019-09-19
  • BNS/TBT Staff

TALLINN - Estonian Prime Minister said that the 2020 state budget includes an 8-percent pension rise through indexation, whereas deliberations of an extraordinary pension hike are still ongoing, public broadcaster ERR reported on Wednesday.

Ratas told the "Aktuaalne kaamera" evening news program of ERR that the government remains committed to the extraordinary pension rise; however, he noted that it is too soon to say whether it will be implemented in 2020 or the next year.

"These discussions are ongoing," he said.

Responding to the reporter's suggestion that the extraordinary pension hike could make use of funds that will become available with the second pillar fund reform, Ratas noted that these resources cannot yet be used next year. The earliest these funds can be used is 2021, he said.

There will be some pension growth, however, the prime minister said.

"What we can say is that an 8 percent pension growth by way of indexation has been planned in the budget, which amounts to around 38 or 39 euros for the average old-age pension with 44 years of pensionable service," Ratas said.

In April each year, all pensions grow as a result of indexation. On April 1, 2020, pension will grow on average by 8 percent as a result.

In the second quarter of 2019, the average old-age pension totaled around 485 euros, which means that the sum will grow to around 524 euros next year.

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 said changes, an index will be determined and confirmed by the government. The base amount of pension as well as the sum payable for a year of pensionable service and the value of national pension rate will all be indexed accordingly.