Abstract
Over the last decades in the Baltic States (Lithuania, Latvia, Estonia), statutory pension guarantees have decreased in favour of market-based instruments and have partially shifted away from public pension schemes towards complementary funded pension schemes. However, this change does not automatically mean a higher pension replacement rate or wider pension coverage, which illustrates the strengthening of statutory pensions during recent years.
Both funded and statutory public pensions should guarantee sufficient financial resources for pensioners, at the same time ensuring social solidarity between generations. In order to increase the pension replacement rate, pension policy should be oriented towards providing sufficient opportunities for the population to participate in complementary pensions and to raising individuals’ responsibility for their welfare.
This paper aims to debate the interactions between statutory public and complementary funded pension guarantees, examining the pension system financing model in the Baltic States in the framework of the recommendations of international organisations. The right to social security (including pensions) is recognised in the Universal Declaration of Human Rights, the International Covenant on Economic, Social and Cultural Rights and other international instruments as a precondition guaranteeing the dignity of life, combatting discrimination, reducing poverty and promoting social inclusion. In this regard, development of complementary pension insurance with state support significantly contributes to ensuring the dignity of life at retirement.
The paper discusses why complementary occupational pensions do not function in the Baltic States and which regulatory-financial instruments could improve this situation, ensuring better pension coverage. Section 1 reveals how the interaction between statutory and complementary pensions has been presented in the scientific literature and by international organisations. Beyond policy recommendations and scientific research, Sect. 2 examines the similarities and differences of pension system construction in the Baltic States and which pension guarantees have been highlighted in constitutional jurisprudence. Section 3 presents the EU instruments that have been introduced to regulate complementary occupational retirement, analyses the development of this type of pension insurance in the Baltic States and discusses possible enhancements. Concluding the chapter, the author provides policy recommendations for better coverage and regulation of pension policy.
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Notes
- 1.
Regarding the right to possession of pensions, in 2002 the European Court of Human Rights issued a ruling (which was cited in the constitutional jurisprudence of Lithuania and Latvia) that the old-age pension is linked with possession: the applicant’s rights to a pension could be regarded as a “possession” within the meaning of Article 1 of Protocol No. 1 and that, consequently, Article 14 of the Convention for the Protection of Human Rights and Fundamental Freedoms was applicable (ECHR 2002).
- 2.
However, a person who opts out of the second pillar or stops contributions can re-join and start drawing a pension again after 10 years.
- 3.
Author’s note: according to the data from the Ministry of Social Protection and Labour of Lithuania, the gross first-pillar pension replacement rate in Lithuania was 26.5% in 2020.
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Bitinas, A. (2022). Improving the Financial Situation of the Elderly: Towards Better Pension Coverage in the Baltic States. In: Limantė, A., Pūraitė-Andrikienė, D. (eds) Legal Protection of Vulnerable Groups in Lithuania, Latvia, Estonia and Poland. European Union and its Neighbours in a Globalized World, vol 8. Springer, Cham. https://doi.org/10.1007/978-3-031-06998-7_7
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