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Pension indexation

 

Indexation of pensions

On 1 April each year pensions grow higher because they are indexed.

Indexation serves the purpose of keeping pensions in balance with changes in wages and prices.
To this end the Government of the Republic approves a new index each year. The index is calculated as follows:

  • 80% – change in receipt of the pension insurance part of social tax in the previous year;
  • 20% – change in the consumer price index of the previous year.

Indexation is only applied if the aforesaid increase. But if they decrease, pensions will not be reduced.

Both the base amount of pension and the value of a year of pensionable service are increased upon indexation.
The base amount of pension, which is the same for all recipients of pension, increases more than the value of a year of pensionable service. This aims to quickly grow the part of pension which is paid to all pensioners in an equal amount regardless of their contribution by working. This also helps those being paid a smaller pension to cope better.
The new value of a year of pensionable service is also the same for everyone but since the value of a year of pensionable service is multiplied by the part that depends on a person’s length of employment, pensions increase differently due to indexation – longer length of employment means a bigger increase and vice versa.

 

BASE AMOUNT OF PENSION

 

The base amount of pension is the foundation of pensions that is the same for everyone.

 

 

As of 1 April 2019 the base amount of pension is 191.6496 euros.

VALUE OF A YEAR 

 

The value of a year of pensionable service is the value of one year of pensionable service or an insurance component.
 

 

As of 1 April 2019 the value of a year of pensionable service is 6.627 euros.

NATIONAL PENSION

 

Those who lack the required minimum pension qualifying period (15 years) are paid national pension. The rate of this pension also changes each year upon indexation.

 

As of 1 April 2019 the amount of national pension is 205.21 euros.
 

 

The base amount of pension, value of a year and national pension are changing every year

As of 1 April 2018:
The base amount of pension was 175.439 euros, the value of a year of pensionable service was 6.161 euros and the rate of national pension was 189.31 euros.

As of 1 April 2017:
The base amount of pension was 161.9038 euros, the value of a year of pensionable service was 5.767 euros and the rate of national pension was 175.94 euros.

As of 1 April 2016:
The base amount of pension was 153.3035 euros, the value of a year of pensionable service was 5.514 euros and the rate of national pension was 167.40 euros.

As of 1 April 2015 the following rates applied:
The base amount of pension was 144.2585 euros, the value of a year of pensionable service was 5.245 euros and the rate of national pension was 158.37 euros.

 

Indexation of pensions in 2019

On 1 April 2019 pensions will be indexed by 8.4% on average. Your pension consists of your personal pension qualifying period and social tax, which means that your old-age pension may increase slightly more or less than 8.4%. To calculate the possible amount of increase of your old-age pension use the old-age pension indexation calculator.

Please use the calculator only if you meet all of the below conditions:

  • Your pension is exempt from income tax (you are not working and you exercise your right to exemption from income tax in relation to your pension);
  • You did not work in 2018;
  • Your pension is not subject to any increases (employment in civil service, rescue service increase, etc.);
  • The amount of your pension is based on your pension qualifying period (not including special pensions calculated on the basis of wage).

If you worked in 2018 the calculator will not provide a correct result because in addition to indexation your pension will also increase on account of received social tax.
The calculator does not take that into account.

The calculator does also not index pensions for incapacity for work or survivor’s pensions.019. aasta 1. aprillil indekseeritakse pensione keskmiselt 8,4%. Sinu pension koosneb just sinu personaalsetest staažist ja sotsiaalmaksust ning seetõttu võib sinu vanaduspension suureneda natukene rohkem või vähem, kui 8,4%. Selleks, et arvutada, kui palju võib suureneda sinu vanaduspension, kasuta vanaduspensioni indekseerimise kalkulaatorit.

 

Old-age pension indexation calculator

 

Viewing the exact amount of your pension as of 02.04.2019

You can view the new amount of your pension in the state portal eesti.ee at the address:

https://www.eesti.ee/est/teenused/kodanik/toetused_ja_sotsiaalabi_1/teie_pension_toetused_ja_huvitised

If you want to access it through the main page of eesti.ee, go to:
www.eesti.ee → Topics→ Benefits and pensions→ Pension→ Services→ Viewing pension, allowance, benefits

Taking the time worked into account and recalculation of pension

In addition to indexation, on 1 April each year we take into account the time worked in the meantime.

We calculate the insurance component for the previous year for pensioners who worked the year before and received an income subject to social tax. Their pension will also increase by that amount in addition to indexation.

The social tax that counts is calculated on wage and business income. So it does not matter whether a person worked the whole year or just for a few months. We calculate the insurance component on the basis of the amount of social tax received.

 

 

Changed amount of pension and income tax

Indexation results in higher pensions and therefore in April each year you should review your best options for exemption from income tax.

Non-working pensioners

If you do not work and your pension is your entire income, you need not submit to us an application for additional exemption from income tax. We will calculate your maximum exemption from income tax based on the amount of your pension.

Working pensioners

If your total income (pension and income from employment combined) is below 1200 euros after 1 April, you need not submit an application for additional exemption from income tax. We will withhold income tax from your pension according to your earlier application.

If your total income (pension and income from employment combined) is higher than 1200 euros after 1 April, you must calculate the new amount your exemption from income tax yourself. You can use the calculator available at www.tulumaks.ee.

Please submit to us an application with the new amount of your exemption from income tax. Keep in mind that if you do not do that, it may happen that the tax exemption calculated during the year is too high. In that case you will be required to pay additional income tax the next spring.

If your total income (pension and income from employment combined) is higher than 2100 euros as of 1 April, your entire income is subject to income tax and you are not entitled to any tax exemption. Please submit to us an application for waiving tax exemption.

You can submit the application to the Social Insurance Board through the state portal www.eesti.ee or by mail (Endla 8, Tallinn, 15092) or e-mail (info@sotsiaalkindlustusamet.ee). You can also bring your application to one of our customer service offices.
The application may be in free form or you can use a set application form which is available HERE