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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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Executive summary

This review assesses the Latvian pension system according to the OECD best practices and guidelines, and draws on international experiences and examples to make recommendations on how to improve it. Although these recommendations should be seen as a policy package, implementing each of them might not be possible in the short-to-medium term. There are two mandatory, earnings related pension schemes in Latvia: a pay-as-you-go non-financial (notional) defined contribution (NDC) and a funded defined contribution (FDC) scheme. Voluntary private pension funds complement the mandatory schemes. The main findings and recommendations are presented below.

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