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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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First layer of protection against old-age poverty

This chapter discusses Latvia’s first-tier pensions and other measures that might limit old-age poverty. There is little redistribution within the earnings-related schemes. Individuals who have low contributions end up with benefits below the relative poverty line. In Latvia, basic pensions provide universal coverage after the retirement age, but the relative level of benefits is very low compared to other OECD countries. Moreover, there is no survivor pension for spouses. As a result, old-age poverty rates are high in Latvia, especially among those older than 75 years and among women.

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