In April 2010, the Estonian parliament approved a draft Act stipulating an increase in the retirement age. Under the draft legislation, the retirement age would be gradually increased by three months a year, so that by 2026, it would be 65 years for both men and women. The increase will mainly affect people who are now up to 50 years of age. While trade unions disapprove of the new act, employers say that the change should have been introduced years ago.
At present, Estonia’s retirement age is 63 years for men and 60 years and six months for women. It has already been decided that, by 2016, the retirement age for women will be gradually increased to 63 years. The need to raise the retirement age even further has been repeatedly emphasised, but no real changes had been made to date.
In November 2009, the Estonian State Chancellery (Riigikantselei) introduced the Competitiveness Plan for 2009–2011 and therein proposed the idea once again. On this occasion, the government decided to put the proposal into practice. The main reason for increasing the retirement age is to alleviate the labour shortage accompanying the decrease in the active population in the labour market. Current forecasts predict that while there are currently four persons of working age for one retired person, in 2030 there will only be three persons and in 50 years’ time there will only be 1.8 persons of working age per retired person. Thus, in order to ensure the sustainability of the pension system and the labour market, the retirement age needed to be reformed.
The government approved the plan to raise the retirement age and sent the draft Act to the parliament (Riigikogu). It claimed that this would be the solution to Estonia’s demographic problem of an ageing population and that, in the long term, it would reduce the burden of the pension system on the budget. Estonia’s Prime Minister, Andrus Ansip, explained that the increase in the retirement age would ensure a retirement pension increment for current and future pensioners. Other alternatives are either to raise taxes, reduce pensions or bring in migrant workers to Estonia in order to ensure the sustainability of the pension system.
The opposition parties contended that a decision of this scale should be more thoroughly analysed and they tried to halt the reform. They argued that before the retirement age is raised, the life expectancy of the population, which is currently one of the lowest in Europe, should be improved. Moreover, the gender difference in life expectancy is one of the largest in the EU, according to Statistics Estonia (Statistikaamet), as women live on average almost 11 years longer than men (79.2 years compared with 68.6 years, respectively).
Despite the controversy, on 7 April 2010, Estonia’s parliament approved the draft Act. Thus, as of 2017, the retirement age will gradually increase for everyone by three months a year, and by 2026, it will be 65 years for both women and men. The increase in the retirement age will mainly affect people who are currently aged 50 years or younger. Persons who are currently 50–56 years old and who will reach their retirement age in 2017–2026 will remain in the transition period.
The Estonian Trade Union Confederation (Eesti Ametiühingute Keskliit, EAKL) agreed that, due to an ageing population, the retirement age increase will be inevitable in the future. However, EAKL proposed that the parliament should implement the work accidents and illness insurance scheme before the reform is initiated. According to EAKL, the draft Act did not take into consideration whether there are enough jobs for pensioners, whether their health conditions enable them to work or what active labour market policies are to be implemented to improve the competitiveness of pensioners.
To show its opposition to the reform, EAKL together with the Estonian Transport and Road Workers’ Trade Union (Eesti Transpordi- ja Teetöötajate Ametiühing, ETTA) and the Trade Union of Estonian Railway Workers (Eesti Raudteelaste Ametiühing, ERAÜ) set up a petition against the retirement age increase. They also organised two pickets in front of the parliament building, one on 24 March and the other on 7 April 2010.
For its part, the Estonian Employers’ Confederation (Eesti Tööandjate Keskliit, ETK) stated that the increase in the retirement age is inevitable and should have been implemented years ago. ETTK acknowledged the government’s initiative, but stated that it should have raised the retirement age even more to 67 years of age.
Liina Osila and Marre Karu, PRAXIS Centre for Policy Studies