Starting April 1, the average monthly old-age pension in Estonia will increase by 5.3%. The national pension (for individuals without the required years of pensionable service) will rise to €414.10 per month. This adjustment is driven by the annual indexation formula, which accounts for the rise in consumer prices and social tax revenues.

The government has submitted the draft regulation for coordination with the Ministries of Economic Affairs and Finance, after which the index will be officially approved.

The Indexation Mechanism

The state recalculates pensions every year on April 1 using a specific formula:

• 80% depends on the annual growth of pension-related social tax revenues.

• 20% depends on the change in the consumer price index (CPI) from the previous year.

In 2025, prices rose by 4.8%, which served as the benchmark for calculating the 2026 index. Following the indexation, the national pension will be €414.10, and the average old-age pension will reach €860.

Tax Exemptions and Working Pensioners

For pension recipients, the tax-free income allowance remains up to €776 per month (€9,312 per year). This benefit is automatically applied by the Social Insurance Board during payment. If a person’s pension is lower than this amount and they continue to work, they may submit an application to their employer to transfer the unused portion of the tax-free minimum to their wages or other income.

Impact on Other Social Benefits

The index also affects other social payments. From April 1, the daily rate for the work ability allowance will be €22.89.

• Partial work ability: 57% of the daily rate (approximately €391.42 per month).

• Full work ability: 100% of the daily rate (approximately €686.70 per month).

The pension indexation system in Estonia operates annually to ensure payments are adjusted at least once a year in accordance with changes in prices and social tax contributions.

According to Narva News, early forecasts for April 1, 2026, also suggested the average pension would grow to approximately €861, which is close to official data (though some materials require authorization for full access).

International Context

Pension policies in neighboring countries and other regions also reflect inflationary pressures. For instance, in Russia, state social pensions were planned to be indexed by 14.75% from April 1, 2025, according to a Russian government draft—a figure significantly higher than Estonia's annual indexation mechanism. In CIS countries, indexing pensions at a level of approximately 6–9% annually is a standard tool for maintaining purchasing power.

According to Eurostat, Estonia’s minimum wage in 2026 remains among the lowest in the EU at €886 per month (based on previous benchmarks), which impacts the relative sustainability of pension payments and remains a topic of discussion regarding minimum wage increases.

The Estonian government’s draft regulation on the new pension index value has been sent for interagency coordination, after which the final decision will be made by the cabinet.