Saeima committee forwards pension law amendments for the first reading

(20.04.2012.)

On Wednesday, 18 April, the Social and Employment Matters Committee of the Saeima accepted amendments to the Law on State Pensions submitted by the government envisaging an increase in the retirement age as of 2014 and forwarded them for the consideration in the first reading by the Saeima. Six members of the Committee supported the relevant Draft Law, three voted against and two abstained.

In an attempt to solve problems related to the ageing population, the Draft Law sets forth a gradual increase in the retirement age for men and women so that by 2020 it will reach 65 years. The amendments drafted by the government also envisage an increase in the minimum length of the insurance period that is necessary to qualify for a state old-age pension. It is planned to raise the length of the insurance period in 2014 from 10 to 15 years, and in 2020 to 20 years. It is planned to maintain the option of early retirement without a time limitation. The Draft Law includes other amendments to the Law on State Pensions.

When presenting the proposed amendments, Arvils Ašeradens, Deputy Chairman of the Committee and Parliamentary Secretary for the Ministry of Welfare, stressed that the planned changes will prevent a deficit of the social budget in the long term. Without changes, the deficit would reach LVL 1.43 billion by 2030. On the other hand, the social insurance budget is expected to have an LVL 1.43 million surplus by 2030 if the proposed amendments are adopted and if as of 2014 supplements to pensions are no longer financed from the social budget but from the basic budget.

Advocating the need for the amendments, Ašeradens pointed out that the population of Latvia is markedly shrinking and ageing so that the demographic burden is ever increasing. There are now approximately 130 working people per 100 pensioners. At the same time, the life expectancy of those who reach retirement age is continuing to grow.

Similar trends are evident in other European countries. Many of them, including Estonia and Lithuania, plan to reform their pension systems and raise the retirement age to 65 years or even more.

Ašeradens noted that the state takes into account the risk of unemployment for pre-retirement age persons and thus offers various relevant measures, such as benefits, training opportunities or support to small business startups.

Andrejs Klementjevs (Concord Centre), a member of the Committee, doubted whether the state is ready for this reform and stressed that no safety-net measures have been proposed to mitigate the effect of the reforms. The state is not discussing broader access to health care services, financing for the promotion of a healthy lifestyle, tax credits or subsidised jobs that would encourage entrepreneurs to employ people of pre-retirement age.

Elīna Siliņa, a member of the Committee, emphasised that many labour market problems, including unemployment in the pre-retirement age group, could be solved by significant cuts in wage taxes because that would enable entrepreneurs to create new jobs.

The Committee decided by a majority vote to forward the Draft Law on the Amendments to the Law on State Pensions to be considered tomorrow, 19 April, at the plenary sitting. It is planned to set 28 April as the deadline for submitting proposals for the second reading.

Saeima Press Service

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