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Pension Reform in the Baltic Countries

image of Pension Reform in the Baltic Countries

Reform of the pension regime is continually evolving in the Baltic countries.  This publication contains individual country reports, comparative analysis from a regional perspective and examines key policy issues in the private pension sector.  It includes perspectives on these issues debated during the Pension Conference organised by the OECD in co-operation with the EU in April 2003 in Tallinn, Estonia.  The analyses benefit from in-depth knowledge of OECD experience in these sectors, as well as from experience in other emerging market economies.

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Comparing the New Pension Systems of the Baltic States

This paper uses a consistent method to compare pension benefits in the Baltic states. The approach is "microeconomic", looking at individual entitlements under the reformed retirement income regimes. The pension entitlements that are modelled are those that are currently legislated. There is no attempt at determining the affordability of these entitlements. The projections of benefits for full-career workers show that these new systems are well diversified, with around half of the net replacement rate coming from the funded schemes in Estonia and Latvia and one third in Lithuania. The new systems are also broadly neutral with regard to pension age and do not encourage early retirement to the degree of many OECD countries. On the other hand, the new systems are more generous and less redistributive than all but a couple of OECD countries. The treatment of pensioners under the personal income tax is also exceptionally generous in all three countries...

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