1. Ageing in Latvia Doc. Staņislava Titova Asoc. prof. Inese Mavļutova
Ieva Aleksandraviča
Larisa Daukste
Linda Krievāne
Santa Novikova
Kristīne Starte
Maija Zieds - Ziediņa
Doc. Staņislava Titova
Asoc. prof. Inese Mavļutova

2. Content CONTENT Population Pension system in Latvia Statistic data
Solidarity principle
Conclusions and recommendations

3. POPULATION

4. POPULATION CHANGES IN LATVIA
Year
Natural increase + Net migration
2007
2008
-9 450
2009
2010

5. Population pyramide
POPULATION PYRAMID

7. PENSION SYSTEM IN LATVIA

8. REASONS OF REFORM OF PENSION SYSTEM IN LATVIA
Pension system existing in Latvia while it was a member of USSR (till 1991) was created for planned economy
The pension amount depended on working experience and average salary in the country, but not on the amount of social security contributions
Low retirement age and ageing of population

9. THREE-LEVEL PENSION SYSTEM
First – state mandatory unfunded pension scheme
Second - state mandatory funded pension scheme
Third – private voluntary pension scheme.

10. PENSION PLANS FOR 2ND AND 3RD LEVELS
Conservative
Balanced
Active
Age
< 10 years
> 10 years
> 20 years
Investment
100% of funds is invested in fixed income financial instruments ( bonds and bank deposits)
25% of funds is invested in the stocks of local and foreign companies
75% of fundsis invested in fixed income financial instruments
40% of funds is invested in the stocks of local and foreign companies
60% of funds is invested in fixed income financial instruments

11. THE TOTAL SOCIAL INSURANCE CONTRIBUTIONS FOR PENSIONS - 20% OF ONE’S SALARY
Year
20% from salary
1st Level
2nd Level
18% 2%
2007
16% 4%
2008.
12% 8%
2009
2010
2011
2012
from 2013
14% 6%

12. PENSION SPECIAL BUDGET
Budgetary resources consist of:
contributions for pension insurance
dividends from the state pension special budget transfer of shares and the proceeds from their sale
other income
Special budget is used to finance following items:
According to the Law "On State Pensions" provided social insurance services: ageing, disability and suvivorship pensions
SSIA (State Social Insurance Association) expenses related to the administration

13. STATE PENSION SPECIAL BUDGET FOR 2011

14. STATE PENSION SPECIAL BUDGET, MILLIONS LVL
Year
Incomes
Expenses
Difference
2008
1017,8
880,6
137,2
2009
810,4
984,9
-174,5
2010
902,4
1147,9
-245,5
2011
948,6
1098,1
-149,5

15. MINIMUM PENSIONS Woking years LVL EUR < 20 49,50 71,06 21-30 58,50
83,98
31-40
67,50
96,90
> 41
76,50
109,82

16. STATISTIC SHOWS REALITY

17. BIRTH AND DEATH Number of births (average) 22156.75
Year
Natural increase
2007
-9 648
2008
-6 908
2009
-8 090
2010
Number of births (average)
Number of death (average)

18. WORKING AGE TOTAL Under working age (0-14) Working age (15-61)
TOTAL
Under working age (0-14)
Working age (15-61)
Over working age (62+)
2010
2,248,374
13.75%
66.03%
20.22%
2011
2,067,887
14.11%
64.12%
21.77%

19. UNEMPLOYMENT UNEMPLOYMENT RATE % 2006 2007 2008 2009 2010 2011
2006
2007
2008
2009
2010
2011
Unemployed residents 5
4.5
5.8
12.8
13.9
14.5

20. LONG TERM MIGRATION Age 2007 2008 2009 2010 20-24 -40 -303 -403 -1041
25-29
-103
-541
-832
-1625
30-34
-83
-399
-779
-1272

21. LIFE EXPECTANCY

23. AVERAGE PENSION

25. EARLY RETIREMENT
Allowed two years before real retirement age – currently from the age of 60.
Social security must be at least 30 years.
Working persons do not receive early retirement pension
Advantages in the social contributions:
For employee from 11% to 9.5%,
For employer from 24.09% to 20.8%.

26. EARLY RETIREMENT EXAMPLE
For persons without early retirement, EUR
For persons in early retirement, EUR
Brut salary
653,1
Untaxed minimum
64,03
Social contributions paid by employee
11%
9,50%
71,84
62,04
Income tax 25%
129,31
131,76
Net Salary=
451,95
459,3
–Social Contributions paid by employee – income tax)

27. SOLIDARITY PRINCIPLE The First pension level
Influencing factors and potential solutions
Social activities and additional support

28. FIRST PENSION LEVEL
The first level of the pension system is mandatory state non-funded pension system.
The first level of the pension system ensures pensions for all who have been socially insured for at least 10 years.
Insurance period < 10 years, person has been granted state social security benefit. 

29. The First pension level
Solidarity of generations
Working population
Generation of pensioners
Women’s pension period
Men’s pension period
Gender solidarity

30. SOCIAL ACTIVITIES AND ADDITIONAL SUPPORT
Clubs for elderlies – communication, singing, traveling, sport activities, knitting etc.
Corporate social responsibility – Merrild coffee, innovative ideas
TV campaigns
Discounts – public transport, pharmacies, optics, theatre, opera, museums etc.
Care homes

32. Eldery people also want to eat every day!

34. INFLUENCING FACTORS AND POTENTIAL SOLUTIONS
Unemployment
Salaries
Retirement age
Death rate
Birth rate
Migration

35. CONCLUSIONS
Latvian pension system involves two obligatory levels and one voluntary level.
Subsistence minimum shows that theoretically living costs should be covered, but practically it is not enough.
Elderlies can participate in different activities and in some special occasions – get additional social support.

36. Conclusions - Recommendations
The negative natural increase and long-term migration cause serious threat to the pension system of Latvia.
Government should carry out changes to stimulate the increase in birth rates and to motivate citizens to stay

37. Conclusions - Recommendations
State pension special budget cannot provide all of the current needs; it is necessary to either increase income or reduce expenditure.
To balance the tax burden, diverting larger share of all tax incomes to social needs, which is very important after recovering of global financial crisis.

38. Conclusions - Recommendations
Solidarity principle does not work effectively because of economic situation in Latvia and in the future it seems to get worse because of demography.
To reduce the lack in social pension special budget government should accept changes in tax legislation which could be done if a greater part of tax income could be redistributed to social sphere.
To increase the birth rates in Latvia the government should create pleasant and secure environment for new families. This could be done both with providing sufficient social benefits, and taking care of environment adapted for mothers and children.

39. Paldies par uzmanību! Thank You for Your attention!