NordenBlaadet – The Estonian Ministry of Social Affairs has sent a draft law on confirming the value of the national pension index for 2023 for coordination. The new index value will be 1.139, which means that pensions and daily rates for disability benefits will increase by an average of 13.9% from April 1st, and the average pension will rise to €700, the largest increase in the past 15 years.
“It is clear that the increase in pensions must go hand in hand with wage and cost of living increases, which is why this year’s increase in pensions is the largest in the past 15 years. In addition to the indexing that will take effect from April, pensioners will have more money left over due to the changes in income tax that came into effect at the beginning of the year, as well as a €20 extraordinary pension increase,” said Minister of Social Protection, Signe Riisalo.
For example, a person with 44 years of service will receive a pension of nearly €84.67 higher, which amounts to €700.02, from April 1st. However, the projected increase was €704, but pensions can still be raised based on the collected social tax, which unfortunately turned out to be slightly smaller than originally projected. Nevertheless, this is the largest increase in pensions in 15 years.
The average pension will still be tax-free, and the tax exemption amount that came into effect on January 1st, which is still €704, will not change. The Social Insurance Board will first apply the tax exemption to the first pillar pension, and the remaining amount, if any, to the second pillar pension from the Pension Centre. If the payouts from the first and second pillars are lower than the tax exemption, the remaining tax exemption can also be used for other income, such as wages.
According to the draft law, the basic pension amount after indexing will be €317.9, and the annual amount will be €8,684. Pensions recalculated according to the 2023 index will be paid out from April.
The Estonian state recalculates pensions every spring to keep them in balance with changes in wages and prices. Each person’s individual pension is calculated based on their previous work contributions. The current indexing system for pensions has been in effect for 15 years since January 1st, 2008, when indexing was linked to social tax revenue in larger quantities.
After the index is confirmed, the Social Insurance Board will recalculate all national pensions with the new values. Individuals can view their new pension amount from April 1st on the eesti.ee portal. Further information is available from the Social Insurance Board’s customer service at 612 1360.
In addition to pensions, the daily rate for disability benefits will also be recalculated, which will be €18.60 from April 1st, and for those with missing work ability, the average amount of support will be €558 per month. For those with partial work ability, the disability allowance is calculated at 57% of the daily rate, and the average disability allowance for those with partial work ability is €318.06. The size of the disability allowance is calculated by the Unemployment Insurance Fund for each calendar month.
Featured image: Unsplash
Source: NordenBladet.ee