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Penion indexation

 

PENSION INDEXATION

 
Each year, April brings a positive change into the coping of our elderly people – pensions increase. On April 1st, all pensions are indexed to keep them in proportion with the changes in salaries and prices.
It must be kept in mind that just like there is no “average person”, there is also no average pension that would apply to all, nor an identical pension raise. Depending on their previous work contribution, an individual pension has been calculated for each person and indexation increases it also differently – for some by a greater, for others by a lesser extent.
The size of the pension index is calculated based on the changes in the pension insurance component of past year’s social tax, and the consumer price index. The pension index is calculated according to the change in the accrual of the pension insurance component of the social tax (80 per cent), and the change of the consumer price index (20 per cent) during the last year. These changes give rise to an index that is ratified by the Government of the Republic. 
The index is used to multiply all indicators that national pensions are based on – the base part and yearly rate of pensions, and also the national pension rate. The base part of the pension is increased more than the yearly rate. It aims to faster increase that part of the pension that is paid in an equal part to all, regardless of their work contribution. This helps also those people to cope better whose pension is small. 
 
If the consumer price does not grow and the social tax share decreases, then no indexing takes place as pensions cannot be lowered.
 
BASE PART OF THE PENSION. The base part of the pension is the pillar that is the same for all pension types. Starting from April 1st, 2016, the base part of the pension is 153.30 euros.
YEARLY RATE. The yearly rate is the cost of one year of pensionable service, or the insurance component. Starting from April 1st, 2016, the yearly rate of the pension is 5.514 euros.
Example. 
In 2015, the following rates applied: 
Base part of the pension 144.2585
Yearly rate 5.245
National pension rate 158.37
 
On April 1st, 2016, the indexation took place. New rates were applied:
Base part of the pension 153.3035
Yearly rate 5.514
National pension rate 167.40
 
 
PENSION RECALCULATION
In addition to indexation, the insurance components of pensions are reviewed each year, on April 1st. According to data in the pension insurance register, an additional insurance component shall be calculated for pensioners who worked last year and received income taxed with the social tax. In addition to indexation, this increases the insurance component of their pension – meaning that their total pension amount will be higher. It is irrelevant whether the person worked the entire year or only for a few months. The pension increases depending on the social tax calculated for the person’s salary or business income.
 
 

PENSION RECALCULATION

In addition to indexation, the insurance components of pensions are reviewed each year, on April 1st. According to data in the pension insurance register, an additional insurance component shall be calculated for pensioners who worked last year and received income taxed with the social tax. In addition to indexation, this increases the insurance component of their pension – meaning that their total pension amount will be higher. It is irrelevant whether the person worked the entire year or only for a few months. The pension increases depending on the social tax calculated for the person’s salary or business income.

 

 

Pensioni kalkulaator

 

     

     

    Rannel Silov

    pensionivaldkonna juht

     
    rannel.silov@sotsiaalkindlustusamet.ee