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International Internet Magazine. Baltic States news & analytics Tuesday, 21.09.2021, 22:44

Praxis: inequality will be reflected in future pensions in Estonia

BC, Tallinn, 20.11.2013.Print version
Andres Võrk, analyst of political studies centre Praxis, stressed on Tuesday at a discussion over the sustainability of the Estonian pension system, that little attention has been paid to the fact that there will be a lot more inequality among pensioners in the future than there is now, LETA/Public Broadcasting reports.

The reason for that is that by creating a system of pension pillars, the state has made the future pension dependant largely on how much money a person would earn before retirement. Earlier, the pension mostly depended on worked years.


"While currently pensions are relatively similar for people who retire, thanks to the reforms, the big inequality that is in wages today will be transferred to the pension insurance system," said Võrk.


Võrk said also that the current situation that social tax is not sufficient for first pension pillar payments is an accounting problem since expenses can be covered from other tax revenues. The current deficit in the range of 1% of GDP is largely caused also by transfers to the second pillar.


Võrk said that it is much more important of the system is socially and economically sustainable, the first guarantees that the pensioner isn’t living in poverty risk and the second that the spending on pensions wouldn't endanger the economic progress.

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