Agency apologizes to early pensioners

Photo: Caro / Scanpix

The social insurance board has changed its decision and apologizes to pensioners after it threatened to deprive board members of pension.

Postimees wrote toward the end of January how the social insurance board gave people receiving early retirement pension a choice between resigning from company management boards or waiving their pension.

The agency contacted 206 people and stopped pension payments for seven individuals. Nearly 180 people found a replacement to serve on their company's board in order to continue receiving pension. Twenty people asked for an extension and were given until the end of February to make a decision.

One of the latter was founder of Bastion Indrek Stahl, who was been retired for two and a half years but remains active on the boards of Ingement and I.S.A Capital. Stahl told officials he has received neither wages nor dividends.

„In the eyes of the law, working is activity aimed at earning income subject to social tax or acting as an entrepreneur,“ adviser of the board's benefits department Katrin Välling said in January. „The law does not tie enterprise to income subject to social tax or other types of income.“ She added that all of the country's entrepreneurs have been entered into the business register.

260 retired entrepreneurs

„Therefore, if there is an active entry for a person in the business register, that person is active as an entrepreneur. In a situation where a person in the business register has not reached the general retirement age, they are not eligible for early retirement pension,“ Välling explained.

The agency has changed its opinion and work practice by today. „We are contacting everyone this matter concerned to apologize and sort things out,“ chief of the benefits department Kati Kümnik promised.

„In the future, stopping early retirement pension payments will only be possible in cases where the person has income subject to social tax based on a contract of employment or services, or a contract in civil law,“ Kümnik added. She referred to the confusion as a work accident.

The board carried out a control audit late last year because officials proceeded from different interpretations of the law when determining early retirement pensions. The agency checked 4,000 early pensioners and found 260 of them to be entrepreneurs in the eyes of the law. „The law can be interpreted in different ways; however, in the end we decided to choose the more favorable interpretation,“ Kümnik said.

The seven people who were initially denied pension payments were compensated in full on February 9.

„By now, we have notified the people whose pension we froze as well as the people who asked for more time to decide whether to give up their pension or delete themselves from the business register,“ Kümnik said. She promised the board will give changes more consideration in the future and discuss them with other participants.

„We will compensate people in cases where our actions have resulted in additional expenses. We currently have one such claim,“ Kümnik added. The official said expenses in question are tied to legal assistance.

At the same time, the law officials must proceed from is still confusing. Section 43 of the pension insurance act states that early retirement pension will not be available if the person is working. The law defines working as „earning an income subject to social tax based on contracts of employment or services, or contracts in civil law, or being active as an entrepreneur“. The law states that people who have an income are not eligible for early pension, while it fails to elaborate on what is meant by „acting as an entrepreneur“.

Early retirement pension smaller

Early retirement pension is an option available to people with at least 15 years of pensionable service in Estonia. The privilege is created up to three years prior to reaching the official retirement age.

Early retirement pension is correspondingly smaller. While early and regular retirement pensions are calculated in the same manner, the former is reduced by 0.4 percent for every month left until reaching official retirement age. If a person retires three years early, the calculation is: 3 x 12 x 0.4 = 14.4. The person's pension will be 14.4 percent smaller for the rest of their lives as it is not subject to recalculation upon reaching retirement age.