bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Monday 16.07.2018 | Name days: Hermīne, Estere

ERGO: 1st-tier of pensions hardly to ensure subsistence minimum

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

Baltic news, News from Latvia, BNN-NEWS.COM, BNN-NEWS.RU

Deniss Sazonovs

It is unlikely Latvia could abandon a pension system as such, however, the first tier of pensions could hardly ensure the subsistence minimum in future, Deniss Sazonovs, ERGO board member, told the business news portal BNN.

How big is ERGO market share?

Life insurance market share of ERGO Life Insurance SE Latvia branch accounted for 20% in late 2010. This ranks ERGO among the leading market players.

As opposed to risk insurance sector, life insurance market has been growing gradually over the past year in Latvia and the Baltics in general. If it was non-life insurance that showed better performance before the crisis in 2006-2007, now its life insurance sector that is expanding and we forecast it will grow 15% yearly in the coming years.

Do you agree to the social anthropologist Roberts Kilis that Latvia will abandon the pension system as such?

Discussions on the sustainability of the pension system are topical for sure, however, I believe it will not be abandoned completely. There will be huge changes as to the amount of pensions.

Generally speaking, there are a couple of reasons that raise fear about the sustainability of the pension system. First of all, the the number of tax payers has been dropping significantly, secondly, the shadow economy’s proportion is huge as well. Neither are there any signs it could shrink in near future. Moreover, the demographic situation is also sluggish, as birth rates keep falling while the proportion of pensioners is climbing.

This means people should be ready the retirement age will be raised, as there are no resources to increase pensions, given the fact that consolidation and the sovereign debt repayment are already carried out at the expense of the social budget.

Will people’s personal savings play a major role in future?

It is forecast already now those residents of Latvia whose income does not exceed the average monthly wage (about 465 lats) will receive not more than 50% of the monthly remuneration in pension payments. This applies to official income only, of course, thus it is already clear that pensions will not be big enough.

Third tier of pensions is the only key to ensure welfare. These are savings accumulated during working years. However, more and more people have started to save and, hopefully, this tendency is ongoing.

How big savings do Latvians make monthly?

ERGO data on the average yearly savings per a private person show it was about 258 lats, which means the average monthly sum accounts for 21.50 lats or 6-7% of the income.

People aged over 35 make savings most often and the key reasons for doing that are still the same – wedding, baby arrival, and credit liabilities. Their average income hits about 500 lats a month.

136 947 persons in total in the Baltics have purchased ERGO accumulated life insurance.

What impact did the crisis have on the saving habits of people in Latvia?

They did realize savings are crucial, that’s for sure. It is clear that it is more difficult to find free resources to save up during the crisis. According to ERGO and DnB Nord bank survey in late 2010, 70% of people in Latvia had not made any savings before the recession, which explains why the welfare of them was hit so dramatically.

Does the attitude towards savings differ among Latvians, Lithuanians and Estonians?

Despite, ERGO study shows 48% are not ready to make any savings at all, people now realize that making savings is practically the only way to ensure pension days and survive critical situations.

It is also crucial to point out that people’s thinking that a big salary is necessary to make savings is wrong as well. Practically, it is enough with 15 euro monthly payment. The earlier the person starts to save the better.

What are your forecasts for 2012?

ERGO first half-year estimate shows life insurance market keeps growing. Moreover, it is with great future prospects on both Latvian and the Baltic level.

Processes going on in the state such as the pre-election atmosphere, social budget cuts and other factors allow to expect dynamic years.

Moreover, there will be tougher competition in market shares redistribution and clients attraction. Similarly as last year, the insurance sector will keep consolidating processes as well and seek for ways to boost efficiency alongside with optimization of resources, so that investments bring maximum return.

 


Leave a reply

  1. Bil says:

    He has some good points.

Week in Lithuania. Lithuania's Tripartite Council fails to reach agreement

Lithuania's Tripartite Council on Tuesday, July 10, failed to reach agreement on raising the minimum wage. Employers are inclined to back the government's proposal to raise the minimum pay to 420 euros. Meanwhile, trade unions want it increased to 450 euros.

BNN summary of the week: NATO to increase and ABLV Bank loses its license

BNN offers a summary of this week’s topical news in a variety of categories: Future; Deal; Fight; Decline; Decision; Opinion.

SEB Bank to unite life insurance companies working in Baltic States

SEB Bank will unite life insurance companies working in Baltic States, BNN was told by SEB Bank’s representative Agnese Strazda.

Saeima deputy Askolds Kļaviņš becomes suspect in criminal case

Saeima deputy from the Union of Greens and Farmers Askolds Kļaviņš has been made a suspect in the criminal case regarding abuse of official power.

Minister: E-health system has stabilized, but improvements are still needed

Functionality of the E-health portal has stabilized. Disconnection errors have ceased. Nevertheless, we have to continue improving the system further, said Latvian Healthcare Minister Anda Čakša said in an interview to Rīta panorama programme of LTV.

Six to eight Finance and Capital Market Commission officials may work at ABLV Bank

Six to eight FCMC trusties may work at the liquidated ABLV Bank, says Finance and Capital Market Commission chairman Pēters Putniņš.

Latvia’s Cabinet of Ministers receives expanded draft on deposit system

Environment Protection and Regional Development Ministry has submitted to the Cabinet of Ministers an expanded legislative draft regarding amendments to the Packaging Law and Environment Protection Law for their review in the State Chancellery, as confirmed by the ministry’s representatives.

Latvia will not escape talks on increasing defence spending

It is necessary to develop Latvia’s defensive capabilities. Because of that, Latvia cannot escape talks on increasing defence spending to more than 2% of GDP, said Defence Minister Raimonds Bergmanis, who is participating in the NATO summit in Brussels.

Russia extends food product embargo until end of next year

On Thursday, 12 July, Russian President Vladimir Putin decided to extend the embargo on food product imports from countries of the European Union and other countries until the end of next year.

Heat in Latvia to remain for longer; thunderstorms and heavy rain expected, as well

Next week in Latvia will be appropriately hot for summer, as air temperature is expected to reach +30° C at times. Nevertheless, most of Latvia will experience rain and thunderstorms, as reported by State Environment, Geology and Meteorology Centre.

US President announces «tremendous amount of progress» in defence spending matter

On Thursday, 12 July, US President Donald Trump announced having achieved a great deal of progress in the NATO member states’ defence spending matter during the summit.

Providus: it is impossible for Latvian parties to attract large funding honestly

«If we look at political parties’ ability to attract funding from large companies, for example, conclusions are rather sad – there is no way for parties in Latvia to attract funding in an honest way,» Providus think tank researcher Iveta Kažoka said in an interview to BNN.

Study: Latvian residents rely on knowledge and hard work rather than luck

30% of Latvia’s residents believe company success formula relies on decade-long work and significant profits, as well as employee satisfaction, according to the latest Latvian Barometer study of Baltic International Bank.

Competition Council warned 34 persons for possible cartel agreements this year

In the first half-year of 2018 the Competition Council warned 34 persons about possible cartel agreements in six possible violation episodes. Affected companies work in three sectors – burial, security and driving school services.

European Commission predicts 9% lower wheat harvest for Latvia this year

According to estimates from the European Commission, Latvia’s wheat harvest is likely to be 9% below that of last year, according to information from Agriculture Ministry’s Market and Direct Support Department.

ECB revokes Latvian ABLV Bank’s credit institution license

European Central Bank has decided to revoke Latvian ABLV Bank’s license, as confirmed by Finance and Capital Market Commission.

US President asks allies to increase defence expenditures to 4% of GDP

During NATO summit in Brussels US President Donald Trump told leaders of participating member states that they have to increase their expenditures on defence to 4% of GDP.

NATO agrees to station multinational division North headquarters in Latvia

In accordance with an agreement reached by Denmark, Latvia and Estonia, it has been decided to station the headquarters of NATO’s multinational division North at Ādaži base, as confirmed by Latvia’s Foreign Affairs Minister Edgars Rinkēvičs.

President vetoes two bills over consecutive days, still enjoys high support

Lithuanian President Dalia Grybauskaitė has used her presidential powers in full swing this week, vetoing two bills over two consecutive days. First the head-of-state vetoed amendments paving the way for a far-reaching overhauling of the country‘s healthcare facilities. And the next day, on Wednesday, July 11, she scrapped amendments to the Referendum Law, which, if implemented, would have lowered the threshold for a dual citizenship referendum. President cautioned that the bill was potentially not in compliance with the Constitution.

Competition Council permits merging of two energy wholesale traders and producers

On 4 July, Latvia’s Competition Council decided to permit the merging deal as a result of which Enefit Green AS will gain decisive influence over Nelka Energia AS by purchasing 100% of the company’s shares. Permission was given because the merge is not expected to have a major impact on competition on the market, the council explains.

Riga mayor’s Ligo congratulation cost taxpayers more than EUR 15,000

The broadcast of Riga Mayor Nils Ušakovs’ Ligo congratulation by media cost EUR 15,211, as confirmed by Riga City Council deputy Vilnis Ķirsis.

Police requested prosecution for 50 insolvency administrators in past several years

Since 2016, Latvia’s State Police have received several hundred reports regarding possible illegalities during insolvency processes. Over the course of the last two years, police have asked the prosecutor’s office to commence criminal prosecution of 50 insolvency administrators.

External trade turnover in Latvia grew 9.6% in May

In May 2018 foreign trade turnover of Latvia amounted to EUR 2.32 billion, at current prices constituting 9.6 % more than in May 2017, of which exports value of goods rose by 8.5 % and imports value of goods by 10.4 %.

Will funding volumes remain the same for culture after Latvia’s centenary?

Latvia should continue investments in Song and Dance Celebration infrastructure, said Culture Minister Dace Melbārde in an interview to LNT.

Prosecutor’s office ends case on OCMA official’s involvement in fictive marriage organization

The Prosecutor General’s Office has ended the case launched against and official of the Office of Citizenship and Migration Affairs, who was allegedly involved in organization of fictive marriages, as reported by LNT News on Tuesday, 10 July.

Most read

Most commented

Newest comments