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Sunday 21.01.2018 | Name days: Agne, Agnese, Agnija
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Expert: solution for pension problem – social budget revenue rise

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In the long-term, the only way out from the vicious circle of pension problems is boosting the social budget revenue, which can be achieved by business development and legal remuneration promotion. In a situation with low income of the people, the social budget spending cuts alone will not solve the problem, considers the Chairman of AS Citadele Open Pension Fund Board Uģis Vorons.

Baltic news, News from Latvia, BNN-NEWS.COM, BNN-NEWS.RULow pensions and remuneration of working-age population along with a dropping population form a vicious circle out of which new social budget revenue source can be the only way out. This source is the Latvian business promotion, workforce growth and a system when employers and employees are motivated to receive legal salaries and pay taxes, Vorons indicates.

He emphasizes it is clear that together with the population decline and life expectancy growth, Latvia, as well as other European countries, will not manage to provide adequate state-guaranteed pensions to their citizens in the long term, and the significance of the 3rd Tier in the pension system will increase. The private pension accruals will no longer be a luxury, but an actual necessity. However, at the same time, it is also clear that the private pension savings plan cannot work if people have low income and no possibilities to put aside money for pension contributions every month. Therefore, the revision of pension system foundation is the solution, basing it on business growth promotion and shadow economy combat.

To his mind, the 3rd Tier is currently the only pension system element that has not been undermined by political decisions; moreover, the state supports it with tax incentives. Yet the 3rd Tier will provide tangible results only for future pensioners, and only if they are now able to make contributions in their pension savings.

An increasing number of Latvians are aware of the 3rd Tier pension scheme importance, because the volume of contributions paid-in at Citadele’s pension plans is increasing rapidly. Comparing January 2010 to January 2011, the total sum of the contributions to the 3rd Tier pension savings at Citadele has risen more than six times, but in February 2011 – more than twelve times, the expert points out.

Also, companies are gradually resuming to make contributions to their employees’ pension savings, informs the expert, adding that in this respect Latvia has created a very commendable system, namely, when making contributions to the 3rd Tier both businesses and individuals receive tax reliefs, this way gaining immediate financial benefits.

Last year, Citadele Open Pension Fund paid in supplementary pensions 1.23 million lats to the 3rd Tier pension scheme participants. In 2010, supplementary pensions were received by 1 924 individuals, aged 55 years and selected Citadele Open Pension Fund as the manager of their 3rd Tier pension plan.


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  1. Kiky Pio says:

    Pensions will not be enough for those who are currently paying social taxes!

    Thumb up 0 Thumb down 0

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