Statutory Old Age Pension Scheme
Riiklik vanaduspension
Coverage
Mandatory insurance
- Employed persons (incl. self-employed, civil servants, and persons in vocational training).
- Specific groups of economically active persons, such as members of the management or controlling bodies of legal persons; sole proprietors (incl. notaries and bailiffs); sole proprietors’ spouses participating in the activity of the enterprise; creative persons engaged in a liberal profession to whom the artistic association pays the support for creative activity; persons in the military service.
- Specific groups of economically inactive persons, such as parents during child-raising periods and home caregivers; claimants of income replacement benefits incl. recipients of sickness benefits, injury benefits, unemployment benefits; persons with work incapacity; participants in labour market training or work practice; non-working spouses of some state officials during service abroad.
Exempted
- Students at a vocational or higher educational institution (other than doctoral students).
- Work-specific professional groups covered by the superannuated pensions scheme.
Financing
General finances
- Mainly PAYG-financed from insurance contributions.1
- Partly tax-financed out of the general budget.
Contribution rates
- Persons born after 1982 (as they are also mandatorily insured in the mandatory funded pension) and persons who have voluntarily joined the mandatory funded pension: fixed share of monthly gross earnings (16%) with no contribution assessment ceiling paid by the employer.
- Persons born before 1982 who have not joined the mandatory funded pension: fixed share of monthly gross earnings (20%) with no contribution assessment ceiling paid by the employer.
- Special provisions for contribution payments apply to some groups (e.g. home caregivers, marginally employed persons, creative persons).
- The self-employed contribute the same total rates themselves.
Administration
- The ‘Social Insurance Board’, which falls under the government of the Ministry of Social Affairs, takes administrative responsibility for all affairs related to the scheme.
Qualifying Conditions
Qualifying conditions
- Standard old age pension: statutory retirement age increases to 65 until 2026 for insured persons born after 1961; minimum insurance period: 15 years.2
- As of 2021, the retirement age increases according to life expectancy.
- Special retirement conditions apply to certain groups (described below).
- Persons engaged in hazardous jobs: available 5 years before the standard retirement age, minimum insurance period: 25 years (at least 12 years and 6 months of hazardous work).
- Persons engaged in particularly hazardous jobs with arduous working conditions: available 10 years before the standard retirement age, minimum insurance period: 20 years (at least 10 years of particularly hazardous work).
- Caregivers of many children or children with disability: available 1 up to 5 years before the standard retirement age.
- Persons unlawfully held in a custodial institution or in exile (during and after World War II): available up to 5 years before the standard retirement age.
- Persons suffering from pituitary dwarfism: available at age 45.
Early retirement
- Available up to three years before the standard retirement age with negative (permanent) adjustments to pension benefits (0.4% per month) (this early retirement option is abolished as of 2021).
- Introduction of flexible early retirement as of 2021: available 1 to 5 years before the standard retirement age depending on the number of acquired insurance periods, with varying negative (permanent) adjustments to pension benefits.
Deferred retirement
- Retirement can be deferred with positive (permanent) adjustments to pension benefits (0.9% per month).
Combining employment & retirement
- Termination of employment is not a precondition for claiming standard old age pension benefits.
- After reaching statutory retirement age, employment is permitted without earnings limit.
- Early retirement pensions cannot be combined with employment until the retirement age of standard old age pension has been reached.
- Introduction of flexible conditions for combining employment and retirement as of 2021: possibility for combining early retirement and employment; possibility for receiving half of the pension benefit or halting the receipt of the entire pension amount for a desired period (choice can be changed every month/12 times a year).
Benefits
Pension benefits
- Primarily based on the amount of contributory earnings throughout working career, incl. pension-credited periods of e.g. child-raising.
- Minimum amount: pension-tested benefit for persons with a pension below the minimum statutory pension level (EUR 221.63 in 2020).
- Maximum amount: no fixed maximum amount.
Factors for benefit calculation
- Based on the following factors: (a) ‘the base amount’ (EUR 215.5 in 2020), (b) ‘pension qualification period’: depends on the number of pension-relevant periods (up to 1998) which is multiplied by a yearly rate,3 (c) ‘insurance part of the pension’: depends on the sum of insurance contributions since 1999 paid by employer which are multiplied by a yearly rate, (d) ‘joint component’ (in force as of 2021): obtained by multiplying the sum of 50% of the insurance part of the pension and 50% of the novel ‘solidary component’4 with the yearly rate.
- Pension supplements: provided in the benefit calculation for participants of wars, persons incapacitated for work as a result of a nuclear disaster, nuclear test, or an accident at a nuclear power station, caregivers for raising children.
- Adjustments: yearly adjustment of pension value accounting for changes in personal earnings in the previous year which were subject to social security contributions (recalculation of the insurance part of the pension) and changes in wages and prices (calculation: 80% reflects changes in social insurance revenue and 20% reflects changes in the consumer price index of the previous year); no downward adjustment possible.
Taxation and social security contributions
- Overall tax exemption of total income (combined income from pension benefit and other earnings) of up to EUR 6,000/year (up to EUR 500/month); total income between EUR 500/month and EUR 2,100/month is subject to progressive income tax rate; total income higher than EUR 2,100/month is subject to income tax.
- Pension benefits are not subject to social security contributions.
Coverage
Financing
Administration
Qualifying Conditions
Benefits
Mandatory insurance
- Employed persons (incl. self-employed, civil servants, and persons in vocational training).
- Specific groups of economically active persons, such as members of the management or controlling bodies of legal persons; sole proprietors (incl. notaries and bailiffs); sole proprietors’ spouses participating in the activity of the enterprise; creative persons engaged in a liberal profession to whom the artistic association pays the support for creative activity; persons in the military service.
- Specific groups of economically inactive persons, such as parents during child-raising periods and home caregivers; claimants of income replacement benefits incl. recipients of sickness benefits, injury benefits, unemployment benefits; persons with work incapacity; participants in labour market training or work practice; non-working spouses of some state officials during service abroad.
Exempted
- Students at a vocational or higher educational institution (other than doctoral students).
- Work-specific professional groups covered by the superannuated pensions scheme.
General finances
- Mainly PAYG-financed from insurance contributions.1
- Partly tax-financed out of the general budget.
Contribution rates
- Persons born after 1982 (as they are also mandatorily insured in the mandatory funded pension) and persons who have voluntarily joined the mandatory funded pension: fixed share of monthly gross earnings (16%) with no contribution assessment ceiling paid by the employer.
- Persons born before 1982 who have not joined the mandatory funded pension: fixed share of monthly gross earnings (20%) with no contribution assessment ceiling paid by the employer.
- Special provisions for contribution payments apply to some groups (e.g. home caregivers, marginally employed persons, creative persons).
- The self-employed contribute the same total rates themselves.
- The ‘Social Insurance Board’, which falls under the government of the Ministry of Social Affairs, takes administrative responsibility for all affairs related to the scheme.
Qualifying conditions
- Standard old age pension: statutory retirement age increases to 65 until 2026 for insured persons born after 1961; minimum insurance period: 15 years.2
- As of 2021, the retirement age increases according to life expectancy.
- Special retirement conditions apply to certain groups (described below).
- Persons engaged in hazardous jobs: available 5 years before the standard retirement age, minimum insurance period: 25 years (at least 12 years and 6 months of hazardous work).
- Persons engaged in particularly hazardous jobs with arduous working conditions: available 10 years before the standard retirement age, minimum insurance period: 20 years (at least 10 years of particularly hazardous work).
- Caregivers of many children or children with disability: available 1 up to 5 years before the standard retirement age.
- Persons unlawfully held in a custodial institution or in exile (during and after World War II): available up to 5 years before the standard retirement age.
- Persons suffering from pituitary dwarfism: available at age 45.
Early retirement
- Available up to three years before the standard retirement age with negative (permanent) adjustments to pension benefits (0.4% per month) (this early retirement option is abolished as of 2021).
- Introduction of flexible early retirement as of 2021: available 1 to 5 years before the standard retirement age depending on the number of acquired insurance periods, with varying negative (permanent) adjustments to pension benefits.
Deferred retirement
- Retirement can be deferred with positive (permanent) adjustments to pension benefits (0.9% per month).
Combining employment & retirement
- Termination of employment is not a precondition for claiming standard old age pension benefits.
- After reaching statutory retirement age, employment is permitted without earnings limit.
- Early retirement pensions cannot be combined with employment until the retirement age of standard old age pension has been reached.
- Introduction of flexible conditions for combining employment and retirement as of 2021: possibility for combining early retirement and employment; possibility for receiving half of the pension benefit or halting the receipt of the entire pension amount for a desired period (choice can be changed every month/12 times a year).
Pension benefits
- Primarily based on the amount of contributory earnings throughout working career, incl. pension-credited periods of e.g. child-raising.
- Minimum amount: pension-tested benefit for persons with a pension below the minimum statutory pension level (EUR 221.63 in 2020).
- Maximum amount: no fixed maximum amount.
Factors for benefit calculation
- Based on the following factors: (a) ‘the base amount’ (EUR 215.5 in 2020), (b) ‘pension qualification period’: depends on the number of pension-relevant periods (up to 1998) which is multiplied by a yearly rate,3 (c) ‘insurance part of the pension’: depends on the sum of insurance contributions since 1999 paid by employer which are multiplied by a yearly rate, (d) ‘joint component’ (in force as of 2021): obtained by multiplying the sum of 50% of the insurance part of the pension and 50% of the novel ‘solidary component’4 with the yearly rate.
- Pension supplements: provided in the benefit calculation for participants of wars, persons incapacitated for work as a result of a nuclear disaster, nuclear test, or an accident at a nuclear power station, caregivers for raising children.
- Adjustments: yearly adjustment of pension value accounting for changes in personal earnings in the previous year which were subject to social security contributions (recalculation of the insurance part of the pension) and changes in wages and prices (calculation: 80% reflects changes in social insurance revenue and 20% reflects changes in the consumer price index of the previous year); no downward adjustment possible.
Taxation and social security contributions
- Overall tax exemption of total income (combined income from pension benefit and other earnings) of up to EUR 6,000/year (up to EUR 500/month); total income between EUR 500/month and EUR 2,100/month is subject to progressive income tax rate; total income higher than EUR 2,100/month is subject to income tax.
- Pension benefits are not subject to social security contributions.
1 According to the terminology in the national law, the statutory pension scheme is financed from ‘social tax’ instead of using the concept of ‘insurance contributions’ in accordance with the Estonian Social Tax Act.
2 The minimum amount of contributions per year must be equal to or more than the minimum wage for the given year.
3 Yearly rate: the cost of one pension qualifying year or the insurance component determined annually. The yearly rate in 2020 is EUR 7.10.
4 The solidary component is 1.0 if the contributions have been paid to the extent of at least 12 times the minimum wage for the country during the year. If the contributions are less than the minimum annual wage, the solidary component shall be calculated proportionally.
Legal Basis: State Pension Insurance Act, Chapter 2 (Riikliku pensionikindlustuse seadus, 2. peatükk); Old Age Pensions under Favourable Conditions Act (Soodustingimustel vanaduspensionide seadus); Persons Repressed by Occupying Powers Act (Okupatsioonirežiimide poolt represseeritud isiku seadus); Social Tax Act (Sotsiaalmaksuseadus); Income Tax Act (Tulumaksuseadus).