The aim of the study is to analyse Estonian pension system and implemented pension reform, based on EU common pension objectives and indicators, and assess, which aspects of Estonian pension system align with EU objectives and which aspects need further development. Each objective, from the 11 common EU objectives relating to pension systems, is analysed in the context of Estonian pension system, and important statistical data is given and collated with other European data, identifying important connections and trends.

Looking at Estonian pension system, following 11 objectives were analysed:

  • prevent social exclusion in old age
  • allow people to maintain their living standards
  • promote solidarity between and within generations
  • raise employment levels
  • extend working lives
  • ensure sustainable pensions in a context of sound public finances
  • adjust benefits and contributions so as to share the financial consequences of ageing in a balanced way between the generations
  • ensure that private pension provision is adequate and financially sound
  • adapt to more flexible employment and career patterns
  • meet the aspirations for greater equality of women and men
  • make pension systems more transparent and demonstrate their ability to meet the challenges

During the study, none of the countries’ pension systems were completely in accordance with the above objectives, however, Estonian pension system is relatively good at achieving these objectives. Pension reforms have played an important role in achieving that, which changed the pension system to three-pillar system. I pillar (state pensions) were reformed and additional pension schemes launched, which added II pillar (funded pensions) and III pillar (supplementary funded pensions). Given reforms created new opportunities to increase the retirement age income, raised motivation and interest of people in taking part of financing their own pensions. Reforms also made the rules and financing of the pension system more transparent and created financial sustainability. However, the reforms also created new risk factors e.g. transferring existing income inequality to retirement age.

Although Estonian pension system is good at achieving the objectives set by EU, there are many special schemes in Estonian pension system that are in conflict with the objectives. Particularly, state vocational special pension systems and old age pensions based on years of work and special conditions. These schemes jeopardise solidarity in the pension system, reduce the working years, place extra strain on the public finances and hinder the flexibility of the labour market.

See also

About Estonian pension system on the Ministry of Social Affairs website