Eurostat information for 2021 present that general the quantity of pensions paid has elevated in comparison with 2020, however when calculating how a lot of a rustic’s gross home product is spent on them, spending has truly decreased.
At the moment, on common throughout the European Union, international locations spend 12.9% of gross home product on pensions for his or her residents. Nevertheless, in 2020, these figures amounted to 13.6% of gross home product.
In accordance with Eurostat, in 2021, about 1.882 billion euros had been spent on old-age pensions in EU international locations.
Latvia has a few of the lowest pension prices
Among the many member states, Greece spends essentially the most cash on pension prices. Pensions accounted for 16.4% of gross home product on this nation. Italy lags behind by simply 0.1 proportion level, spending 16.3% of gross home product on pensions in 2021. Austria is the third largest spender, spending 15% of its gross home product on pensions.
In flip, Eire, Malta, Hungary, in addition to Lithuania are highlighted as leaders on the backside of the listing based on Eurostat. In Eire, spending on pensions is 4.5% of gross home product, in Malta – 6.4%, in Hungary – 7% and in Lithuania – 7.1%.
Latvia can also be not far behind Lithuania by way of the quantity of funds allotted from the gross home product to pay pensions. In Latvia, spending on pensions in 2021 amounted to 7.9% of gross home product, which is lower than, for instance, in Estonia, the place 8.1% of GDP was allotted to pension funds.
Economist at Luminor Financial institution Peteris Strautins defined that the pension system in Latvia was constructed considering the capabilities of the state.
In Latvia as an entire, much less of the gross home product is collected within the type of state taxes and social insurance coverage contributions, particularly 30%, than in different European international locations – 40%.
Thus, authorities spending must also be decrease.
The state allocates considerably much less for social wants than the EU common, Strautins summarizes.
An analogous system exists in the remainder of the Baltic international locations, the place, along with Latvia, a smaller share of GDP is allotted to pensions than the EU common.
Strautins explains this case by historic selections taken through the creation of the Latvian state within the Nineties. On the time, politicians prioritized financial growth, so the pension system was designed to put the least potential burden on the state finances.
“The strategic concept was to provide the financial system room to breathe. This case, the place social spending is considerably beneath the European common, has helped Latvia keep a business-friendly atmosphere. Enterprise taxes in Latvia are very low. This has helped it develop quickly – because the mid-Nineties, Latvia’s GDP per capita in actual phrases has greater than tripled amongst European Union international locations. In accordance with this indicator, Latvia is in second place after Lithuania,” he says.
The darkish facet of historic coverage selections, as Strautins factors out, is that the present pension system is just not notably beneficiant. This works in such a approach that the particular person pays social contributions himself, creating financial savings for retirement. Nevertheless, this additionally signifies that a employee with a decrease wage could make smaller contributions and obtain a smaller pension.
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2024-06-26 21:46:24