Seimas gives final backing to pension reform
The Seimas of Lithuania on Thursday gave its final backing to a proposed pension reform, with 76 votes in favor of the amendments to the Law on The Accumulation of Pensions, five against and 8 abstentions.
The amendments will stop the transfer of part of the social insurance SoDra's contribution to private pension funds. They will also change the private pension accumulation formula and make the SoDra the only payer of pension annuities.
The reform's supporters say it will help to put the pension system in order, separating private pension accumulation from its accumulation in the social insurance fund SoDra. And critics say it will only make the situation for future pensioners worse.
The planned automatic inclusion of workers into the II-tier pension accumulation has also come under criticism, and some critics are skeptical about making the SoDra the sole payer of annuities.
Under the amendments, residents will transfer 3 percent of their monthly salary to private pension funds, and the state will add 1.5 percent from the average monthly salary in the country.
To create favorable conditions for residents to provide funds for private pension accumulation, the SoDra contribution and the personal income tax rate will be reduced by 1 percentage point.
The changes also stipulate a new procedure for involving residents in the accumulation of their pension in II tier pension funds would also cut the deductions for pension accumulation companies.
Under the plan, the SoDra would become the centralized annuity payer as of 2020 (currently, life insurance companies provide pension annuities).