Analytics, Estonia, Financial Services, Legislation, Pensioners

International Internet Magazine. Baltic States news & analytics Wednesday, 22.10.2014, 16:50

Problems of sustainability of pension system considered in Estonia

BC, Tallinn, 11.03.2014.Print version
At the sitting of the State Budget Control Select Committee of the Riigikogu in Estonia, today the focus was on the audit report of the National Audit Office on the sustainability of the pension system of the state, reports LETA.

The Chairman of the Committee Mihhail Stalnuhhin said that a rapid reorganization of the pension system is very important in the light of the warning signals set out in the report of the National Audit Office.

 

"The audit report on the sustainability of the pension system requires decisive action because there is no time for delay. Obviously, the state needs a long-term plan in order to ensure the sustainability of the pension system," Stalnuhhin said. He referred to the tendency according to which the pensionable age is planned to be raised to 65 years until 2026. After that, the number of pensioners will begin to grow rapidly.

 

According to the estimation of the National Audit Office, the pension insurance will be in deficit at least until 2060. In 2014, the planned deficit will be around 363 million euro. In 2017, the deficit is planned to amount already to 474 million euro. The National Audit Office draws attention that such a large deficit curbs the development of other spheres. As the main reason for the deficit, demographic processes are highlighted. Eventually, 1.3 workers will maintain one pensioner in 2060, while this ratio was 1.7 in 2008.

 

According to the data set out in the report, the state budget expenditure was 1.61 billion in 2013, which accounts for 21 percent of the state budget. The number of pensioners is over 400 000, a majority of whom, ca 300 000, receive various kinds of old-age pensions.

 

Stalnuhhin considered it important that, according to the recommendation of the National Audit Office, the most suitable automatic adjustment system be found by the end of 2016 at the latest, taking into account the demographic and economic situation and the particularity of the pension system of Estonia. For that, agreements will need to be concluded as early as possible, so that they could be implemented as of 2026 when the determined rise of the pensionable age will end.

 

Stalnuhhin stressed the importance of the relevant recommendations of the National Audit Office to the Minister of Social Affairs for optimal resolution of the problems relating to special pensions in cooperation with the Minister of Internal Affairs, the Minister of Justice and the Minister of Defense.

 

In the estimation of the National Audit Office, in the situation of the decrease of the number of working age people, the increase of the number of pensioners and the extension of life expectancy, the state needs a long-term plan, a reform of different types of pensions and a development of the regulation of the second pillar pension funds. The current system favors early retirement which aggravates the deficit of the pension insurance. The Committee deems it important that the problems relating to the employment of the elderly be solved.

 

In Stalnuhhin's words, the issue is highly topical and needs a thorough future-looking analysis. Therefore the Committee deems it necessary to continue the discussion of the issue.

 

The Committee sitting was attended by representatives of the National Audit Office and the relevant ministries, agencies and organizations.






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