Pension system developments in Estonia, Latvia and Lithuania

Abstract

Pension systems in three Baltic countries are based on three pillar systems: first pillar being covered by PAYG schemes, second one – private mandatory funded pension schemes, and the last one – voluntary private funded and occupational pension schemes. The third pillar in all three countries remain rather modest as voluntary private pension systems as well as occupation pension systems are underdeveloped due to lack of traditions, trust, and dominating relatively low income population. During still present hard times financial unsustainability of pension systems, the importance and viability of each pillar were discussed in Baltic countries. These discussions were dominated by distrust being expressed over private mandatory pension schemes as being highly dependent on financial markets and, with short and midterm economic and financial development perspectives in mind, potentially generating ambiguous results.