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Latvian finance minister: Improvements needed to state-funded pension system

Latvian Finance Minister Arvils Aseradens told the TV3 news channel this morning that improvements are needed to the country’s state-funded pension system.

The minister said that during the past 17 years, investments in the system have yielded only 4% in earnings, which shows that it needs improvement.  “If a bank only earns 4% during 17 years, something seems not quite right,” the minister added.

Aseradens denied that there were plans to conduct a total overhaul of the state-financed system:  “No, I have no such plan, but when it comes to ways in which banks or managers set interest rates, yes, absolutely.”

The minister went on to call for asset managers to demonstrate an interest in the growth of pension capital.

“I don’t think this system works very well.  Clearly we need to see what needs to be fixed and we’ll try to put it right during the next four years,” Aseradens declared.

As has been reported, the Latvian government last week voted to amend the law on state-funded pensions.  The amendments were prepared by the Latvian Welfare Ministry and stipulate that 1% of contributions to pension schemes will be transferred from the second pillar of the state-funded pension scheme to the first pillar, which is the state’s compulsory unfunded pension schemed, doing so with contributions from January 1, 2025, until December 31, 2028.

The Welfare Ministry explains that this is will make it possible to cut labour taxes and perhaps contribute more to the overall amount of future pensions.

18,418 participants in the state-funded pension scheme retired in 2023 and applied for their pension.  The average duration of their participation in the pension scheme was 17.3 years, and during this period of time, each participant contributed an average of EUR 5,156.27 to the pension scheme.  The average accumulated pension plan was hence EUR 5,360.75 per participant.  This means that pension capital of these residents increased by 4% during their participation in the pension scheme.

Source: BNS

(Reproduction of BNS information in mass media and other websites without written consent of BNS is prohibited.)

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