They wish to introduce primary pensions in Latvia. What it’s?

As the newest “Getting old Report 2024” of the European Fee (EC) predicts, the most important discount within the pension-to-wage ratio is predicted in Latvia between now and 2070.

The EC report states that in nearly all European Union (EU) member states, the typical state pension acquired will lower in comparison with the typical wage acquired. The most important lower is predicted for Latvia – if the present common state pension in relation to the typical wage in Latvia is 25.5%, then in 2070 the pension shall be solely 13.5%. Which means that an individual who acquired a remuneration equal to the typical wage within the nation and has not saved the rest upon retirement will obtain a state pension in 2070 equal to 13.5% of their earlier wage.

Within the case of Latvia, the primary issue influencing the lower within the “state pension cost ratio” from 25.5% in 2022 to 13.5% in 2070 is the rising switch of the share of the state old-age pension to the 2nd pension pillar – thus , state funding or a part of the first pension pillar is diminished, and the share of the 2nd pension pillar is elevated, the ministry explains. The first pension pillar pays 14%, and the 2nd pension pillar – 6%. Demographic and financial elements additionally play a task.

The Ministry of Welfare attracts consideration to the truth that a lower within the “state pension cost ratio” because of each demographic, systemic and different elements is projected from 2022 to 2070 for nearly all member states.

In response to the ministry, it’s crucial to maneuver in direction of offering a “primary pension” for all recipients of old-age pensions – as is already taking place in each Estonia and Lithuania. The “primary pension” shall be a daily month-to-month cost paid from the state primary funds along with the old-age pension calculated from state social insurance coverage contributions. The “primary pension” shall be paid to all old-age pension recipients.