Government endorses 5.8 percent pension rise

The Estonian government on March 13, 2014 endorsed 1.058 as the value of the index of state pensions effective from April 1, 2014, which means that pensions will rise by 5.8 percent on average.

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). According to data of Statistics Estonia, CPI rose 2.8 percent last year while figures available from the Finance Ministry show that 7.3 percent more social tax money than the year before flowed into pension insurance.

The index endorsed for 2014 is smaller by 0.6 percent than the calculated index because in the crisis years 2009-2011 the calculated value of the pension index was below 1.0 but pensions were not cut. The State Pension Insurance Act obliges the government to add or clear the part of index that was not increased or reduced within five years, and the reduction of 0.6 percent this year is the last reduction to offset the effect of the smaller receipts in 2009-2011.

The pension increase this year is estimated to take 62 million euros from the state budget.

The change would raise the old-age pension of a person with 15 years of pensionable service to 209.37 euros a month. With 44 years of pensionable service the new size of the state pension will be 353.33 euros a month.

Source: BNS / Estonian Review

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