The Praxis Center for Policy Studies has presented the government with a report on the sustainability of the Estonian social security system that focuses mainly on the effect that population aging will have on the system in the future.
According to Praxis analyst and University of Tartu lecturer Andres Võrk, the pension system will be running deficits for years to come, seeing as how long-term balance is sensitive to population aging. As such, it is important to find the appropriate means for maintaining the balance of the pension system.
Based on the analysis, the elderly will soon outnumber the working-age people. Predictions say that the proportion of over 65-year-olds in the population will increase nearly twofold in the next 50 years, from 17 percent to 32 percent, while the ratio of over 65-year-olds to working-age people will grow from 28 percent to 67 percent by 2060.
After having considered the report, the Cabinet decided to task the Ministry of Finance and the Ministry of Social Affairs with preparing within a year an analysis on how to modernize the pension system in such a way as to make it more adaptable to population aging and to provide security for both current and future pensioners.
The Praxis report on the sustainability of the Estonian social security system was prepared in cooperation with the Ministry of Social Affairs, the Health Insurance Fund, the Unemployment Insurance Fund, the Insurance Association, the Bank of Estonia, the Trade Union Confederation, and the Employers’ Confederation. Additional funding came from the European Social Fund.