We’ll all grow old someday, says a popular song. However, we do not have to grow old and could instead value and encourage active aging. Part of getting older is reaching retirement age, which should come with a solid retirement age and the ability to work if one wants to work rather than struggle to survive.
To do this, of course, we have to increase pensions and much more. If the average pension were tax-free, retirees would have some of the additional amounts currently spent on paying taxes. Admittedly, this would benefit people who receive an average pension and who may still be working. I think the state shouldn’t increase pensions with one hand while taking them back in the form of an income tax with the other.
Pension increases must continue in the coming years
Last year’s pension affects the annual indexation of pensions. This also applies to this year’s extraordinary pension increase and the indexation for the pension advance in the coming years.
The average pension increase of 1.6 percent went into effect in April. In connection with the extraordinary pension increase, the average old-age pension for 44 years of service rose by € 24 to € 552 per month. A pension supplement per adult child for one of the parents will be added as decided by the previous government.
The national basic pension recipients with a number of 3,000 were increased by € 30 to € 255.
The extraordinary pension increase is only part of the overall picture with which we want to promote the prosperity of older people. A comprehensive approach to making older people feel valued enables them to meet their social needs, participate in public and cultural life, sharpen their minds, and do some work that inspires them or otherwise Contributing to society, for example by helping others or promoting community initiatives as a volunteer.
I am glad to see that the mindset that an elderly person is a valued employee and member of the community is more widespread thanks to their experience and knowledge. This was also the focus of the social campaign “Vanus on väärtus” (Age is a value) from last year, which focused on the motivation and necessity of older workers.
The Tallinn University Program “Developing Capacities to Protect the Interests of Older People” provides training to representatives of organizations on creating a supportive environment to stay active in old age and bring about the necessary changes.
I set up a mental health task force with an expert think tank to put together measures to alleviate rising stress levels in an ongoing crisis in March. Mental health problems affect all social groups, including the elderly, who are at risk not only from the virus, but often loneliness, fear, and restlessness.
We have been keeping a concerned eye over the past few months at the number of people leaving the second pillar of pension, which will force society to take more responsibility for coping with people after they retire. The solidarity first pension pillar is like a lifesaver for the future, while the pressure on society in the years to come will be considerable as the proportion of the working-age population continues to shrink.
Even when we reach retirement age, livelihoods depend largely on ourselves and how well prepared we have for a decent retirement. Are we betting on the solidarity of redistribution of the social resources of the first pillar or have we created a solid income based on the second and third pillars to enable a safe and active retirement?
We have to bear in mind that the first pillar pension will remain modest in the future and that the quality of life can be maintained through savings. One possibility is the so-called company pension scheme, which only a few companies offer today.
All of this suggests that pension increases must continue in the years to come. In addition, additional amounts should not be devoured by income tax – the average pension must be and remain exempt from income tax. All employees and employers should take care of their future pension today, because only together can we create the conditions for a decent pension. So that we don’t have to be afraid of getting older, but instead can have satisfaction and joy in getting older.
Livelihood of pensioners in Estonia
Few older people in Estonia live in absolute poverty or in a situation where they cannot cope. In 2019, 2.3 percent of people lived in absolute poverty, while it was less than 1 percent in the over 65 age group.
The absolute poverty line was € 221 for a single person’s household. At the same time, relative poverty as an indicator of income inequality was highest among people aged 65 and over, mainly because the age group has a lower employment rate and people often live alone.
Statistics Estonia data suggests that 41.4 percent of people over 65 and 76.8 percent of people living alone lived in relative poverty in 2019, meaning their net income was less than € 611.
The 2018 Pension Adequacy Report suggests that pensions are the key to poverty alleviation as the pension is the main source of income for the elderly. Pension adequacy means that pensioners avoid the risk of poverty and can actively participate in social and cultural life. The latter helps alleviate the problem of loneliness and the risk of social isolation.
The European Commission has repeatedly raised the issue of elderly poverty in its report for Estonia. The latest report reiterates that the relative poverty rate among older people (65 years and over) remains very high in Estonia. Estonia’s relative poverty rate among older people is one of the highest in Europe after Latvia and Bulgaria.
The Estonian social protection system is characterized by low social spending in terms of GDP. The same applies to the old-age pension. Estonia is one of the countries with the least spending on pensions. While the average EU member state spent 10.1 percent of GDP on pensions in 2018, Estonia only spent 6.4 percent of GDP.
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