No. 40



Adequacy and Sustainability of Estonian Pensions in Comparative Perspective

11 December 2019


RiTo No. 40, 2019

  • Lauri Leppik

    Lauri Leppik

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

In comparison with other European countries, the Estonian pension system is characterised by a relatively low level of pensions, both as regards the level of basic minimum protection and replacement of previous earnings.

The risk-of-poverty rate of older persons in Estonia is among the highest in the EU, while the theoretical replacement rate of old age pension is the lowest in the EU. The low level of pension adequacy results from a combination of two factors: a low level of pension expenditure as a percentage of GDP and a high percentage of pension recipients in the total population. Notably, the latter is mainly due to a high share of pension recipients below the general pension age, rather than the share of 65+ population (which is around the EU average). On the other hand, sustainability of the Estonian pension system has been internationally assessed to be relatively good. Such evaluations are based on adopted reforms (incl. gradual increase of pension age), increase of pension assets and high employment rates of older persons. These key features lay the context for future pension policy choices in Estonia.