Portrait of an Ascending Sovereign Credit
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
Age-related Spending, Projected Change
(2019-2070, % GDP)
•
state compulsory unfunded pension scheme (the 1st tier)
Latvia's reformed pension system consists of three tiers:
•
•
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)
-0.6
Estonia
AA-/A1/AA-
France
Latvia
AA/Aa2/AA A+/A3/A-
Finland
Austria
Belgium
Czech
AA+/Aa1/AA+ AA+/Aa1/AA+ AA/Aa3/AA- AA-/Aa3/AA-
Source: European Commission Ageing Report, May 2021
Latvia's age-related spending is among the lowest in
(2019, % GDP)
EU
6.0
17.3%
5.0
14.8%
12.2% 12.3%
5.1
4.0
10.9%
4.5
9.5%
8.5%
3.0
6.1% 6.6%
7.3%
3.6
3.3
15.8
2.8
2.0
2.3
2.0
1.0
1.7
1.5
1.2
0.0
2011
2012
2013 2014 2015
2016
2017 2018
2019
2020
Latvia
A+/A3/A-
Estonia
Czech
Belgium
Finland
Austria
France
AA-/A1/AA- AA-/Aa3/AA- AA/Aa3/AA- AA+/Aa1/AA+ AA+/Aa1/AA+ AA/Aa2/AA
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
Source: European Commission Ageing Report, May 2021
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