“We would see two or three main circumstances that we will point to.” The first would be critical illnesses, the second would be severe disability that would affect either the hoarder or a member of the hoarder’s family, a minor child. There were also expressed positions regarding the housing that is being destroyed – should there not be such an opportunity to take advantage of earlier termination of the contract. We recently had an example of a fire here, if it is not prohibited. However, we are still coordinating and discussing this circumstance,” M. Navickienė answered the question during the Government Hour.
“Nor would I rule out the possibility that a person himself could point to a circumstance which he thinks is extremely difficult or renders accumulation pointless, which we may not have thought of.” I would tend to look for as much flexibility as possible with respect to savers, but without denying the really great need for all of us to save and take care of our pensions more,” continued the minister.
The important circumstance indicated by the person should be motivated, but the specific model has not yet been constructed. These proposals are born after the discussions of the Ministry of Social Security and Labor with economists, the Bank of Lithuania, representatives of savers, pension funds, representatives of trade unions, employers, the Ministry of Finance and “Sodra”. According to M. Navickienė, draft legal acts will be submitted in the second half of April.
The Lithuanian pension system is three-tiered. The first tier consists of a fully state system, that is, working residents pay contributions to “Sodra” from their income and, after accumulating the appropriate length of service, acquire the right to an old-age pension.
The second tier includes the semi-private system, where employees are enrolled to save in private pension funds, but have half a year to refuse to save if they don’t want to. Those who wish to save transfer 3 percent each. from their salary on paper every month, and the state further encourages such hoarders by transferring 1.5 percent each. from the national average wage. Thus, the second tier is partly private, partly money from the state budget also circulates there. Money can only be withdrawn at retirement age, and money is often inherited.
The third stage consists of purely private accumulation in private funds, when a person enters into a contract with the fund and transfers the accumulated money.
The second pension accumulation system was reformed in 2019 by legalizing the inclusion of employees in the system with the right to opt out, increasing contributions to pension funds, reducing pension fund administration fees and completely separating the second tier from the first, as previously they were somewhat related.
However, in March of this year, the Constitutional Court stated that regulation contradicts the Constitution when a person participating in pension accumulation is not allowed to terminate the accumulation, even in exceptional cases, when the circumstances of a person’s life fundamentally change, as a result of which participation in pension accumulation becomes difficult or pointless. The Seimas must now determine the circumstances that would allow the termination of accumulation before reaching retirement age.
