BA School of Business and FinanceResearch

Ageing in EuropeStudents:

Laura Mazure Marita Greidāne

Endijs MelecisUļjana Salija

Reinis VucānsAnna Mavļutova

Research managers:

Inese Mavļutova

Terēze Korsaka

PLAN

• AGEING:

- MIGRATION

- NATURAL DECREASE OF CITIZENS• FIRST PILLAR• SECOND PILLAR• THIRD PILLAR

Population of Latvia during the periods 2000.-2010.

The natural increase of the citizens during the period 2000.-2009.

The biggest aging problem in Latvia is the

pension system!

SOCIAL SECURIY TAX – 34,09%

Maternity benefits, disable pensions etc. – 14,09%

1st pillar -18% 2nd pillar – 2%

3rd pillar - private

1st pillar

• Launched in 1992.• The principle of generation and gender solidarity.• Working population pays the old age pensions.

Black or shadow economy

2nd pillar

• Launched on 1 July, 2001• Everyone’s social contributions are invested into

the financial market and accumulated on the personal account

• Do not have to pay additional social contributions

Total redistribution of the pension capital contributions between

the 1st and the 2ndtiers of the pension scheme

Years 1st tier 2nd tier

2001 - 2006 18% 2%

2007 16% 4%

2008 12% 8%

2009 18% 2%

2010 18% 2%

2011 18% 2%

2012 18% 2%

from 2013  14% 6%

DEFICIT IN 2ND PILLAR

Number of persons involved in the second pension level- voluntary and obligatory

138138224219

304662 374523 423894 451024 468715 479330356924

409466

468608

525575573790

614540 627292 645113

0

200000

400000

600000

800000

1000000

1200000

2003 2004 2005 2006 2007 2008 2009 2010

Obligatory

Voluntary

Investment in the second pension level( mill. Euro)

2003.-2010.

3rd pillar

• Provides an opportunity to save money in private pension funds

• Managed by credit institutions, life insurance companies, investment firms and asset management companies

• Payments are placed in individual account

Savings made by employers from all invetments from 2001.- 2010.

Participants in private pension plans from 2001.-2010.

Conclusion I

• The decreasing of workers who can pay pensions certainly will cause the raising of the retirement age and influence the living quality for seniors.

• Nowadays Latvia runs a three-pillar pension system, which was started to reform soon after independence.

• The share of pensions is divided in two parts-for the first pillar 18% and for the second pillar-2%.

Conclusion II

• The reasons for depopulation in Latvia are negative birth balance and migration problems.

• People in Latvia are having the possibility to increase their pensions by implementing 3 pillar pension system.

• The size of pensions paid has been increased because of inflation and salary increase.

• In Latvia there are seven private funds for now. The third pension level also supply insurance companies.

Proposals I

• Government should give benefits four young people to motivate them stay in Latvia and start businesses – offer them tax reliefs, courses for young entrepreneurs for free etc.

• Government should pay benefits four young families with children.

• The campaign should be made like discussion in simple words, so people could realize this huge ageing problem.

Proposals II

• Latvian government have to indicate specific future of 3 level pension system in country, so people will start to believe in it.

• The government should explain, where the taxes paid are going, so it could help to reduce the black economy.

THANK YOU FOR YOUR ATTENTION!