Will encourage the second pillar of pension to allow the first level / day to be transferred to the first pillar of pensions
Thus, as people approach retirement, they will be able to choose what to do with their second pillar pension to reduce the risk of losing it due to the fluctuations in the financial market.
In revenue in old age, the old -age pension consists of both the first and second pillar pension capital. The funded part of the pension is important in the amount of old -age pension. Currently, second -pillar pension savings are invested in financial markets and their value can both increase and decrease.
The state -funded pension consists of the accumulated funded pension capital and is intended for specific purposes – for old age insurance. By demanding an old -age pension, there are two ways to get the capital accumulated at the second pillar – adding an old -age pension or buying a life insurance (lifelong pension) policy for old age, explained Dace Trušinska, senior expert at the LM Social Insurance Department.
The ministry pointed out that it is particularly important for people in pre -retirement age that their accumulated retirement capital is not reduced and that income retired as possible as possible.
By adopting these amendments, citizens will be able to decide to transfer these savings to the first pillar pension, which ensures that capital will not be reduced and only increased. This will be a voluntary choice – the person will be able to decide when to do so if there are no more than five years left, the ministry said.
The increase in the pension on the first pillar will depend on the second pillar – the higher the pension capital, the higher the pension, Trušinska said. The amount the first pillar pension will be increased by claiming an old -age pension will be calculated in accordance with the Law on State Pensions.
The proposal will be made to the Saeima Budget and Finance (Tax) Commission. It will have yet to be decided and vote in the Saeima.
Similar amendments to the use of a more flexible pension on the use of second -level capital have already been promoted to the Saeima Budget and Finance Committee in 2022, but politicians were not yet ready to support this proposal.
There is a three -level pension system in Latvia. The first pillar pensions are paid to current pensioners from social payments collected in the budget. The second or funded pension is that part of the social contributions of workers are invested in the financial sector. On the third level, there are private pension funds, where funds can be deposited on a voluntary basis.
Members of the state -funded pension scheme, who, when claiming an old -age pension, stopped participating in the second pillar last year, had accumulated an average of EUR 6,575.42, according to the State Social Insurance Agency. The average duration of persons at the second pillar is 18 years.
As reported, Angelika Dobrovolska, Chairman of the Board of « Swedbank Investment Management Company », previously told LETA that the Latvian government should introduce a sustainable solution that would allow citizens to postpone the second pension level capital costs or ensure a gradual cost from the investment plan.
Later, the Ministry of Finance admitted to LETA that it conceptually supports the possibility of crisis situations, such as a major financial market fall, introducing a more flexible mechanism for the cost of the second pension savings, including allowing it to be delayed or paid gradually.
At the same time, the MoF noted that the basic principle of the pension system in Latvia is the first and second -pillar linking, that is, the provisions of both levels are combined to form a single pension. If only the second pillar is postponed and the first pillar pension is granted, this principle is disrupted.
Therefore, the involvement and position of the Ministry of Welfare as a responsible industry authority is required to evaluate and implement such a proposal, the MoF previously explained.
Added 11th Line
