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OECD Reviews of Pension Systems: Latvia

image of OECD Reviews of Pension Systems: Latvia

This report assesses the performance of all components of Latvia's pension system. Latvia was the first country to fully implement a non-financial (notional) defined contribution (NDC) scheme in 1996. A funded mandatory earnings-related scheme complemented NDC since 2001. Voluntary private pensions cover only limited number of people. Over the last 20 years, the severe economic crisis, population ageing and strong emigration have revealed both strengths and weaknesses of the Latvian pension system. The review assesses also the minimum and basic pension schemes which provide the first-layer of protection against the old age poverty especially for those with short or patchy careers. Separate analysis focuses on the disability and early retirement schemes, including the schemes for workers in arduous and hazardous occupations. The detailed analysis leads to tailored recommendations on how to improve the performance of each element as well as the pension system as a whole.

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Early retirement and disability schemes

In Latvia, claiming pension two years before the statutory retirement age is possible within the mandatory NDC-FDC scheme, but this results in a large benefit reduction. Workers of occupations classified as arduous and hazardous and selected public-sector employees can retire early based on more generous provisions. Disability pensions are granted only before the statutory retirement age, after which they are converted into old-age pensions. This chapter discusses these schemes and highlights some policy options to improve their coordination.

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