IDEAS home Printed from
   My bibliography  Save this paper

Old-Age Pension Reform In Estonia On The Basis Of The World Bank’S Multi-Pillar Approach


  • Liina Kulu
  • Janno Reiljan


The current literature about old-age pensions can be characterised by the numerous analyses of pension system reforms in developed countries as well as in developing ones. Although the radical change in economic and social values during the process of transition from command economy to market economy offers many special cases for economists as well as social scientists, only some of them have analysed the developments of pension systems in Central and Eastern European countries. Therefore, the purpose of the present paper is to analyse the adjustments in publicly managed pillar as well the implementation of the funded component of pensions in Estonia, described by previous analyses in general as successful reforms in comparison with the other transition countries. Firstly, in the working paper the aims and the design of the pension system as well as main factors determining pension reform are studied on a theoretical basis. Next, the general overview of the reforms and more specific assessment of the changes in publicly managed scheme and the implementation of the funded scheme in Estonia are given. Finally, the challenges of the multi-pillar pension scheme in Estonia are described and in order to cope successfully with these challenges, some suggestions are made. The study explains that the undervaluation of the social dimension in comparison with the economic one has taken place during the transition period. The pension reform has to some extent ensured the financial sustainability of the pension system, but not fulfilled the two other objectives defined in 2001 by the European Council in Göteborg as a basis of sustainability of the pension system – to guarantee safe and adequate pensions and to respond to the changing needs of society and individuals. The present old-age pensioners (as well as the pensioners in the future) are directly placed at the risk of poverty and the opportunities of elderly people to participate in the societal life are very limited in comparison to the active population. The changes in publicly managed scheme as well as the implementation of the mandatory funded system (II pillar) and supplementary funded system (III pillar) during the period 1997–2002 have not been successful in avoiding potential demographic and macroeconomic risks in the near future.

Suggested Citation

  • Liina Kulu & Janno Reiljan, 2004. "Old-Age Pension Reform In Estonia On The Basis Of The World Bank’S Multi-Pillar Approach," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 34, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  • Handle: RePEc:mtk:febawb:34

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
    2. Peter Diamond, 1993. "Privatization of Social Security: Lessons from Chile," NBER Working Papers 4510, National Bureau of Economic Research, Inc.
    3. Schwarz, Anita M. & Demirguc-Kunt, Asli, 1999. "Taking stock of pension reforms around the world," Social Protection and Labor Policy and Technical Notes 20533, The World Bank.
    4. Arrau, Patricio & Schmidt-Hebbel, Klaus, 1995. "Pensions systems and reform : country experiences and research issues," Policy Research Working Paper Series 1470, The World Bank.
    5. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695, April.
    Full references (including those not matched with items on IDEAS)

    More about this item


    pension reform; transition economies; multi-pillar approach;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mtk:febawb:34. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anne Reino). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.