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Pension system in Latvia

Forecasts show that the monthly income of current workers during retirement will fall significantly. To maintain a customary standard of living, it is important to build retirement savings at all three pension levels.

1st Pension Pillar – State guaranteed pension

1st Pension Pillar involves all social security contributors, and it works on the basis of the principle of generation solidarity. This money is being paid out to the current pensioners as their pensions, but the state guarantees that on retirement the basis of your pension will be formed by the tax payments of future workers.

2nd Pension Pillar

The 2nd Pension Pillar is also constituted by social tax payments, but these contributions are accumulated directly for you and are not shared between the current pensioners. This allows you to create an additional capital to the State guaranteed old-age pension. If you are born in the period from 2 July 1951 until 1 July 1971, you may join the 2nd Pension Pillar on a voluntary basis. For everyone born after 1 July 1971, participation is mandatory.

You have the right to chose the fund's manager, who will invest the accumulated funds for 2nd Pension Pillar in financial markets to raise capital for your future. Moreover, choosing Lifetime Pension Insurance, you can bequeath the savings of 2nd Pension Pillar to any person – a family member, a relative, a friend, or any other next of kin.

Find out how much money is accumulated and earned within the 2nd Pension Pillar on the web-page www.latvija.lv (report State-funded pension scheme (2nd pension level) participant’s account statement). You can connect to the portal with SEB internet bank authentication features (user ID, password, access code). Information can also be obtained in any branch of the State Social Insurance Agency (SSIA). Follow the results of your investment plan daily here, as well as in www.manapensija.lv.

Additional contributions to 1st and 2nd Pension Pillars are not required because this capital is made up of you and your employer's social tax payments, 20 % of your gross salary distributed between the 1st and 2nd Pension Pillar.

You can see the distribution both historically and as it planned for the near future in the table below:

For example, if your salary before tax is 700 EUR, every month of 2018 42 EUR go to the 2nd Pension Pillar. In total it is 504 EUR per year, which is directly accumulated in your retirement savings. 

3rd Pension Pillar

This is the pension level in which participation is completely voluntary. It is your private pension, formed by you or your employer. If you accumulate private pension capital, you will be eligible for personal income tax allowances. You will be able to receive your Private pension before the State pension, even upon reaching 55 years of age, and it is heritable.

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