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International Internet Magazine. Baltic States news & analytics Tuesday, 15.10.2019, 12:12

Bank of Latvia: pensions might reach 24% of average wage in 30-40 years

BC, Riga, 08.04.2019.Print version
Due to ageing of the society and other factors, pensions in 2050-2060 might drop to 24 percent of the average wage, said Bank of Latvia economist Olegs Tkacevs at a discussion of experts on the pension system in Latvia, informed LETA/BNS.

“The size of pensions in Latvia is quite low, and the replacement rate in relation to the average wage in the country in Latvia is among the lowest ones in the EU, and it is expected to drop more in the future,” said Tkacevs.

The replacement rate at present is 40% of the average wage, and it is expected to drop to 34% in 2030 and 24 percent in 2060.

At present, the share of pensioners against working age population is 37% while in 2060 it could rise to 67%. Tkacevs said that there are similar trends also in other EU countries, but they are more distinct in Latvia.

In his words, increase of social contributions would not be a solution. In order to retail the present pension level also in 2060, social contributions should be raised from the current 35% to 53% and it would be one of the highest rates in the world.

Tkacevs believes that the possible solutions would be to increase the base for social contributions, improve the demographic situation, link the retirement age to life expectancy rate, improve operations of the government-funded pension scheme and promote savings.

Hes aid that the pension system in Latvia is economically grounded and financially sustainable as several international experts have admitted, but a number of corrections are needed to ensure respectable income to future pensioners.

“Implementation of these measures will take time, therefore action is necessary right now,” said Tkacevs.

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