Pension system of latvia: Case study approach

Abstract

The current paper offers a case study approach for testing several options and hypotheses. The need for Pension
Reform in Latvia has been the result of a steadily increasing aging of the population. By 2001 a new three-level
pension system was introduced in Latvia aiming to reduce the effect of demographic risks and demonstrating
the country’s intention to provide an optimal public or private compound in old-age provision. Nevertheless,
the demographic prognosis of European Commission estimates that by 2060 the population in Latvia will reduce
from 2.2 million to 1.7 million people, and the number of elderly people will almost double. The potential impact
of demographic change on the age structure and the size of population is dramatic and still the main problem
that cast the doubt on the ability of state mandatory pension scheme to provide the appropriate pension level.
Personal financial planning, personal investments are important. The objective of this research work is to
investigate whether the existing Pension system in Latvia is working effectively under changing economic
environment. It also analyzes the role of Private voluntary pension scheme and the current demographical
situation with a flow of emigration. The research work aims at offering several options for the improvement of
the situation.
Keywords: Economic development, Demography, Pension Levels, Private voluntary pension scheme, Solidarity,
Retirement.