No. 15




Special Pensions – a Threat to Social Justice or a Motivator for Civil Servants?

14 June 2007


RiTo No. 15, 2007

  • Lauri Leppik

    Lauri Leppik

    Senior Research Fellow, Estonian Institute for Population Studies, Tallinn University

Estonian legislation prescribes special pensions for the following categories of officials: police officials, military officials, border guards, judges, prosecutors, chancellor of justice, officials of the state audit and the President.

Other civil servants are paid supplements to their regular state old age pension, depending on the length of civil service. Special pensions remain a controversial component of the Estonian pension system. These pensions have been established by the legislature with the underlying idea of creating a stable and loyal civil service. At the same time, the system of special pensions does not harmonize with the new multi-pillar structure of the Estonian pension system. Broadly, the dissonance relates to the fact that all special pensions are defined-benefit type pension schemes, pensions being calculated as a fixed percentage of the former salary, whereas the first and the second pillars of the Estonian new pension system follow a defined-contribution principle. Compared to ordinary old age pensions, special pensions are rather generous. The median special pension is about 2.3 times higher than the median old age pension. This has led the media and the broader public to perceive special pensions as unjust. The system of special pensions is also very fragmented. For each category of officials the rules of acquiring pension rights, statutory replacement rates and accrual rates are somewhat different. The number of recipients of special pensions has increased from 113 in 2000 to 1,678 in 2006, while the schemes are still in early stage of maturation. It is advisable to re-arrange the existing system of special pensions, creating a unified supplementary scheme for specified groups of civil servants and officials, which should harmonize better with the main pillars of the Estonian pension system.

Full article in Estonian