Estonia and Lithuania have changed the conditions of the second pension level, giving people the opportunity to opt-out of the pension system or withdraw part of their savings early. The Ministry of Welfare, responsible for pension provision, has acknowledged that such an option is being considered in Latvia.
At the same time, economists are critically inclined, noting that this is one of the rare cases where Latvia should not follow the example of its neighbors. The pension system in all three Baltic countries is based on a three-tier model. The first level is a state-guaranteed pension, which is paid from the contributions of current residents. The second level consists of personal savings. This money is invested to ensure a better future in old age. The third level is an additional voluntary fund for those who want to save for an even more secure future.
Until 2021, participation in the first two levels was mandatory for all working people in all Baltic countries. Estonia was the first to reform its system, opening the possibility to opt-out of the second level. When the new rules came into effect in 2021, about 150,000 people - approximately one-fifth of system participants - exited the second pension level. They withdrew more than 1.3 billion euros, and after taxes, about 1.1 billion ended up in people's accounts. Many used this money to purchase cars or household appliances. Others simply left it in their accounts for everyday needs.
Lithuania is now following a similar path - starting in 2026, residents will no longer be automatically included in the second pension level. Those who are already participating will be able to exit the system or withdraw up to 25% of their savings. Lithuania's Minister of Finance, Kristupas Vaitekunas, told Latvian television that the second pension level has always been perceived negatively in society - the fact that people are included in the second pension level without their consent. Furthermore, according to the minister, the benefits of the second pension level have proven to be less than the benefits from the overall development of the economy.
Could Latvia also consider the possibility of early withdrawal of savings from the second pension level? The Ministry of Welfare, which is responsible for pensions, briefly responded to the LSM.lv portal: "Currently, negotiations are underway with specialists in this field. Amendments to the law on state-funded pensions will be made after the most suitable solution is found."
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