Vastus pöördumisele

Suur-Ameerika 1 / 10122 Tallinn / ESTONIA / +372 626 9301 / [email protected] / www.sm.ee / Reg. no 70001952

British Embassy Tallinn [email protected]

Your ref. 03.12.2025 / Our ref. 15.12.2025 No 1.4-2/3040-2

Estonia's State Pension Age policy Dear Mr Frank Üksvärav Thank you for your inquiry on behalf of the UK Department of Work and Pensions. We are pleased to provide insight into Estonia's transition to an automatic adjustment mechanism for the state pension age, which will take effect from 2027. Below are our responses to your questions. 1. What have been the key drivers that have led to a change in State Pension Age policy? The primary driver for this reform is demographic change, a challenge shared by many European nations. Key factors include increasing life expectancy and an ageing population, which puts significant strain on the dependency ratio – the number of working-age individuals supporting each pensioner. As Estonians are living longer, the previous system was becoming unsustainable. The new policy is therefore a crucial measure to ensure the long- term financial viability of our state pension system and to maintain a reasonable balance between the years spent contributing to the system and the years spent receiving benefits. 2. What sort of feedback have you had from your voting public/stakeholders? The legislative process involved formal consultations with key governmental stakeholders, who gave their assent to the proposal. While any reform concerning the pension age is naturally a sensitive public topic, our approach has been to frame the change as a predictable, gradual, and transparent process rather than a sudden political decision. The automatic mechanism is designed to be slow-moving and is based on objective data from Statistics Estonia. Furthermore, the pension age for a specific year is legally established two years in advance, which provides clarity and planning security for individuals. This long-term, data-driven framework has been central to building public understanding and acceptance of the reform's necessity. The changes to the retirement age, which will come into effect in 2027, were adopted by the Riigikogu already in 2017. 3. How will the system aim to work in the event of a rapid change to life expectancy? (either positive e.g. miracle cure drug, or negative e.g. pandemic) The system has been designed with two specific safeguards to mitigate the impact of volatility in life expectancy data. Firstly, the calculation for the life expectancy change is not based on a single year's data but on a five-year rolling average. This smooths out any sharp, short-term fluctuations and ensures that the pension age adjusts based on sustained trends rather than statistical anomalies. Secondly, the law stipulates that the state pension age cannot be raised by more than three months in any given year. This acts as a "speed limit" on the rate of change, guaranteeing predictability and preventing any drastic, sudden increases to the retirement age.

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4. How does the State Pension in Estonia aim to deal with any regional differences in life expectancy? The Estonian state pension system is based on a principle of national uniformity. The life expectancy data used for the automatic adjustment mechanism is the national average for 65-year-olds, as officially published by Statistics Estonia. The policy does not differentiate based on regional, occupational, or socio-economic variations in life expectancy. This approach ensures that the rules are consistent, simple, and universally applicable to all citizens, thereby maintaining a clear and equitable national standard. 5. How long has the process of designing and transitioning to your new system taken? What challenges have you had to overcome? The transition has been a multi-year strategic process. The foundational analysis and policy direction were established with a major pension sustainability analysis in 2016, which was followed by policy development, legislative work, and public communication. A primary challenge has been addressing the risk that the labour market may not be sufficiently flexible to accommodate a growing number of older workers. To overcome this, we rely heavily on active labour market policies delivered by the Estonian Unemployment Insurance Fund, which include targeted services such as upskilling and retraining programs to support the continued employment of older individuals and ensure their skills remain relevant. We hope this information provides a clear overview and is helpful for your review. Please do not hesitate to reach out if you require any further clarification or wish to discuss any of these aspects in more detail. Yours sincerely,

Kristiina Selgis Head of Department of Benefits and Pension Policy

Merle Sumil-Laanemaa [email protected]