Latvia's Economic Response to Covid-19
Pension Reform Underpins Stability of Public Finances
Latvia is well positioned to withstand fiscal challenges arising from an ageing population.
Latvia's Pension System And Recent Reforms
Latvia's reformed pension system consists of three tiers:
•
•
•
state compulsory unfunded pension scheme (the 1st tier)
state funded pension scheme (the 2nd tier)
private voluntary pension scheme (the 3rd tier)
On October 1st, 2020, the State Social Insurance Agency (SSIA) is indexing the
ammount of pensions or parts thereof that do not exceed 454 euros per month.
Indexes vary depending on CPI, years of service and working conditions.
From 1 January 2014, the retirement age is gradually increased by three months
every year - until 1 January 2025, it will be 65 years. In period from 1st January
2021 till 1st January 2022 retirement age is 64 years.
From 1st January 2020, a person has the right to choose to whom to transfer the
capital accumulated in the 2nd tier, in case he or she dies before the granting of the
old-age pension, i.e.:
⚫ transfer the state pension to the special budget (then the capital will be taken into
account when calculating the survivor's pension);
• add accumulated capital to another person's 2nd tier pension;
⚫ leave for inheritance in accordance with the procedures specified in the Civil Law.
Source: The State Social Insurance Agency
The 2nd Tier Pension Net Assets (EUR billion, % GDP)
Age-related Spending, Projected Change
(2016-2070, % GDP)
-1.4
France
Latvia
Estonia
Finland
Austria
Belgium
Czech
AA/Aa2/AA A+/A3/A- AA-/A1/AA AA+/Aa1/AA+ AA+/Aa1/AA+ AA/Aa3/AA- AA-/Aa3/AA-
Source: European Commission Ageing Report, May 2018
Latvia's age-related spending is among the lowest in
(2016, % GDP)
EU
14.8%
5.0
12.2%
12.3%
4.0
10.9%
4.5
9.5%
8.5%
3.0
3.6
7.3%
6.1%
6.6%
3.3
2.8
2.0
2.3
2.0
1.7
1.0
1.5
1.2
0.0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2nd tier pension net assets (EUR billion)
2nd tier pension net assets (% of GDP)
Source: Financial and Capital Markets Commission, Central Statistical Bureau of Latvia
22
16.4
Latvia
A+/A3/A-
Czech
Estonia
AA-/Aa3/AA- AA-/A1/AA-
Belgium
Austria
Finland
France
AA/Aa3/AA AA+/Aa1/AA+ AA+/Aa1/AA+ AA/Aa2/AA
Source: European Commission Ageing Report, May 2018View entire presentation