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Tuesday 25.10.2016 | Name days: Beāte, Beatrise

Ahead of Seimas election Lithuania set to raise shamefully low pensions

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULinas Jegelevičius

For the last seven years, the average Lithuanian pension has not only inched up but shrunk during austerity in 2008-2009. But now, with just over a year till the new parliamentary election left, the Social Democratic Government has started courting the 600,000-retiree army – pension, for some, has risen over an euro from July and another 16 euro are likely to be added to it from the second half year in 2016. At 242 euro now, the average Lithuanian old age pension is 20 euro lower than that one in Latvia and 60 euro thinner that of the Estonian’s.

PM: “It has nothing to do with election”

The Lithuanian Ministry of Social Security and Labor (SSL) says behind the planned raise are rosier social security prospects –with its hands long up to the sleeves in the state’s coffers, social welfare system has shown some more viability lately with more social security money being collected.

«We are consistent as we are monitoring and making forecasts what kind of the year of 2016 will be. We believe that pensions can be raised from July 1, 2016. On average, they should go up by 6 percent from then,» Algimanta Pabedinskienė, the SSL minister, told journalists.

The yank upward is estimated to cost the SS budget 75 million euro and around 10 million euro will come from the state budget.

«The Prime Minister has been informed (about the intentions), and, in October, we will be able to submit a respective proposal along the new budget deliberations. To our current estimation, pension can be increased 6 percent,» the minister asserted.

But the Lithuanian PM, Algirdas Butkevičius, says he wishes the pensions go up already from January 1, 2016, not the second half year of 2016.

«This is my wish. Now the SSL and Finance Ministries have to make the calculations and the decision will be known by the end of September,» the PM told after the Government’s sitting Wednesday, August 12.

He added: «We want that (by making it happen from the new year) our people started finally trusting politicians…It has nothing to do with the upcoming election,» the head of Lithuanian Government insisted.

Government has already raised from July basic state pension by three euro.

Welfare is not state’s priority

With the little feedback on the news so far amid the unrelenting heatwave in Lithuania, only Valentinas Mazuronis, the new chairman of Labour Party, weighed in, saying that wage and pension raise has not become yet state’s priority.

«Social Security and Labour minister has come up with the proposal of pension increase by 6 percent, or around 16 euro. Not often we see a situation, when estimations are done so in advance and decisions are considered in such a far-sighted fashion,” Lithuanian Labourists’ chairman noted. «Going after high and noble maximal quests is a very welcoming thing. If Seimas approves it, pensions will be pegged to annual economic performance, which will guarantee the growth of pensions. This is in the hands of politicians, however…We are third in the EU ranking of the lowest pensions. Such a situation is intolerable and needs to be changed as soon as possible,» the party chief told.

The Labour Party had pushed hard higher minimum wage initiatives in the past, but the pursuits have never been lived up after the party clinched Seimas seats.

Its recent proposal on minimal wage to increase the current minimal wage, now at 300 euro, to 437 euro from July 1, 2016 still collects dust in the drawers of Seimas. But, again, few doubt it is part of the looming electoral campaign.

Lithuanian senior citizens are humble

Meanwhile, major Lithuanian senior citizens organizations have booed the Government plans, calling the initiative «mockery», «slap in the face of old people» and, unanimously, the start of the electoral campaign.

«According to some economists’ calculations, the purchasing power has shrunk around 35 percent over the last seven years. Throughout the period, pensions saw cuts ( in 2008-2009 as a measure of austerity, to be exact –L.J), so the expected raise, having not paid out compensations for the curtailed pensions in 2009, is pure mockery… Those in power get pay raise of thousands of euros, while the minimal wage goes up 50 euro and the pension is raised only five euro,» Vytautas Kadzys, the chairman of Lithuanian Pensioner Party, fumed in a radio interview.

Petras Ruzgus, the chairman of Bočiai, a Lithuanian elderly people organization, told BNN he has received promise from Social Security and Labor Minister, Pabedinskienė, this week that current pensions will grow.

«The minister told me they are going to raise them by 16 еuro from the next year. Our organization has prepared an appeal to all the top-ranking state officials, including the Prime Minister and the President. Should they not turned ear to our demands, we may call our ranks to hit the street. I don’t think they want it, but it may be an option. The thing is the majority of our retirees are very modest and humble. In that sense, we are far behind the Greeks, who can stand up for themselves,» Ruzgus told BNN.

He regretted that it is easy to dissuade Lithuanian pensioners from any public clamouring.

«I obviously cannot complain much as my pension is around 600 euro. The most elder persons are very frugal, but they are made by the life to be that way. It is very unfair to have the average pension 20 euro lower than in Latvia and around 60 euro lower than in Estonia,» the Bočiai chairman told.

Povilas Butkus, also a Bočiai member, does not hesitate that the proposed pension hike is an attempt to court Lithuanian retirees ahead of new Seimas election.

«The prices of goods have soared after the euro adoption and inflation has been in the range of two-digits over the years, but pensions remained intact until now. Life is very uneasy for the most pensioners,»Butkus told BNN.

Lithuanian pensioners unlikely to hit streets

Naglis Puteikis, a Lithuanian parliamentarian, says the euro has been an eye-opener for Lithuanian seniors.

«They started comparing what they are getting with what the others in Europe receive and got startled. We tend to poke fun at Russia, but the average pension there is higher than ours. Even Chinese do a lot better that we here – if not for the deliberate devaluation of their currency this week, their wages would have been soon on par with ours. All comes in comparison,» Puteikis reasoned. «And when we start stacking up things, we see that we scramble on the bottom of the rankings- above of Romania and Bulgaria, as far as pensions are concerned. This is sad.»

He, however, does not expect Lithuanian senior citizens to swarm the streets in protest.

«I think it is impossible. Our set of mind is Nordic- we are too calm and, characteristically to Lithuanians, we take beatings well and a lot. Plus, the faith plays a significant role here. The old folks, and not only they, believe power over others is given by God, therefore all have to obey those in power,» the Lithuanian MP said.

Asked where is the explanation for pensions being higher in neighbouring Latvia, Puteikis told BNN this is about the multi-millionaires.

«There are fewer of them in Latvia and their impact on the decisions of the authorities is not that big as in Lithuania. Our oligarchs have retained their clout over the echelons of power since the Brazauskas era. They managed to make their life- and business conditions – quite cosy – at the expense of the others, note it. I hope, nevertheless, that the most patient nation in Europe, i.e Lithuania, will blow up when the Social Democrats and the other parties from the ruling coalition will enact the amendments to Labor Codex. I see people hitting the streets already next spring. Sure, the people still will be nowhere around in the fury compared to the Greeks,» the parliamentarian predicted.

Asked how pensioners he knows make ends meet, Puteikis told his kin members have encaged themselves in their homes and get through with basic foods.

«Their sustenance is all about daily frugal saving –cutting off better, quality products from the ration. The folks cannot afford holidays, even travelling within Lithuania. The life passes by among four walls at home with a TV set in the front and a couple of the cheapest sausages for the dinner. That’s the Lithuanian pensioner’s reality,» the MP insisted.

Occupational pension funds may be a solution

What could be the solution?

Scholars point to the West, where for several decades already, the countries have had private occupational pension funds where employers transfer money.

«We are only establishing the tradition of private pension funds, the pension funds have only been functioning for ten years and the amount of earnings transferred to them is far from what would be sufficient for a satisfactory old age,» Dalia Kaupelytė , associate professor at Vytautas Magnus University in Kaunas, noted in a recent article published on the site of the University.

In the same article, Ramūnas Stankevičius, CEO of MP Pension Funds Baltic, points out that the issue of occupational pension funds is yet to gain momentum in Lithuania.

“Lithuanian companies are relatively too small to have strong occupational funds, so one solution would be to establish branched occupational pension funds, whose creation would be of interest to trade unions. However, our trade unions are also not as strong as those abroad,» he remarked.

« We could follow the example of the developed European countries, by establishing occupational pension funds and encouraging additional accumulation in the third pillar, as well as the example of Estonia, where the crisis-affected lower payments into second-pillar pension funds were compensated and the average accumulated assets per person are twice as large as in Lithuania. I am certain that we can pursue a larger old-age pension only with a combination of state and private pension,» Stankevičius thinks.

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