The purchasing power of pensions has increased significantly over time and will continue to grow, but the main challenge will be whether pensions can keep up with the living standards of working-age people and how many risks we leave to be borne by a single pillar, write Uku Varblane and Magnus Piirits.
With the arrival of warm weather, many people head out to their summer homes. Unfortunately, this also comes with a list of tasks waiting to be done there. One year the stairs are fixed, the next summer a window is replaced, then the roof corner is repaired or a new boiler is installed.
Each job improves living conditions a little, but at the same time the house ages and new tasks emerge, and expectations about comfort also change. As a result, even though something gets done every year and living conditions improve, the gap between expectations and reality may actually widen.
Pensions face a similar paradox. Future pensions will be significantly larger in euro terms than today and will offer better purchasing power. However, if wages and the general standard of living in society move ahead faster, a pensioner may be better off than today’s pensioners but still further below the average standard of living of their own time.
Eesti Arenguseire Keskus (Estonian Foresight Center) recently analyzed how large pensions could be by 2050 and what kind of purchasing power they would provide compared to today, assuming no changes are made to the pension system.
Authors: Uku Varblane, Head of Research at Arenguseire Keskus; Magnus Piirits, social insurance and economics expert at the Ministry of Social Affairs
Read more: ERR.EE
