OREANDA-NEWS. July 29, 2014. Global financial service provider Allianz has published a Pensions Sustainability Index (PSI) that includes 50 countries and places the Estonian pension system in 11th place.

 Among others, the pension systems of the Scandinavian countries, the United States and Latvia were more sustainable that of Estonia, reaching the top ten of the PSI.

The top three countries of the Allianz international pension sustainability index are Australia, Sweden and New Zealand, followed by Norway, the Netherlands, Denmark, Switzerland, the United States, Latvia and Great Britain. Finland is in 13th place, Russia in 14th, and Lithuania is in 18th position.

The relatively high position of the Baltic States in the pension sustainability index is explained by the use of a IInd and IIIrd pillar pension system that supports the national Ist pillar. In addition, in both Latvia and Estonia, payments to the second pillar were increased temporarily to compensate for those payments that were missed during the economic crisis, enabling  achievement of, an income at pension age that exceeds the poverty threshold and also reduces the load on the social system.

Indrek Holst, the head of SEB Elu- ja pensionikindlustus commented on the results of the Allianz study, saying that although the sustainability of the Estonian pension system is considered to be quite high and acts as an example to several European countries, it still has plenty of room for development to improve Estonia’s prospects.

“Although the Allianz Pension Sustainability Index reveals the fact that the Estonian pension system is built on pension funds as a positive example, this study does not assess the sufficiency of the pension. That is, whether the established system can ensure the continuation of the living standard that people are used to. When we take a look at the development of the IIIrd pillar where saving activity is decreasing, we have to admit that currently the system can provide an average pension that makes up about 40% of the pre-pension salary. It is definitely no reason to be content,“ Holst added.

The Allianz PSI study is based on the demographic information of the country, the pension system model and state financing as the model for calculating the pension sustainability index. The PSI index indicates the current state of the national pension system and the need for future reforms. The study reveals that those reforms carried out in the past twenty years have brought significant changes to the world’s pension scene. Pay-As-You-Go pension systems are replaced by prefinanced schemes such as pension funds and insurance, predetermined pension schemes replaced by instalment-based pension schemes and, instead of family support structures, the use of public and formal support structures is increasing.