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The state pension will increase by one fifth in April

13.03.08 Postimees

Today, the government confirmed the index value of the state pension for 2008, which will increase the pension by 21.6%.

The size of the index for 2008 depends on a 20% growth in the consumer price index and an 80% increase in the receipt of the pension insurance portion of the social tax, the press representative of the Ministry of Social Affairs reported.

According to the Statistics Board, the annual growth of the consumer price index was 1.066 in 2007, and the annual growth in the receipt of the pension insurance part of social tax was 1.253, which makes the value of the state pension index 1.216, or a pension growth of 21.6 per cent.

Another major change in the current year is that the basic amount of pension will increase by more than so far, which is why its growth amount is multiplied by the coefficient 1.1. The growth amount of the value of a year of pensionable service is multiplied by the coefficient 0.9.

«What is most important is that our elderly and currently active workers could look to the future, knowing they will have a steady income when they retire. The stable and continuous growth of pensions must be guaranteed, and the changes in economic growth must also be taken into account,» said Maret Maripuu, Minister of Social Affairs. «The system for forming pensions must be persistent and clear.»

In recent years, pensions have undergone a one time raise, as well. According to Maripuu, the raise in pensions cannot depend on one time political decisions.

«The pension increase must take into consideration developments in Estonian life and depend on what actually affects the amount of pensions – how many people are working, how much they earn and what the inflation rate is,» said the Minister.

 As of 1 April 2002, state pensions have been indexed every year. Once a year, practically all state pensions (e.g., national pension, incapacity pension and survivor’s pension, in addition to old-age pension) are multiplied by an index, the value of which depends on the change in prices and wages and receipt of social tax.

In previous years, the index depended 50 % on the change in the consumer price index and 50 % on the change in the social tax received.

Alo Raun,
Postimees.ee