In Latvia, contributions into the second pension tier are made automatically from one's gross salary under 'social contributions'. 6% of the salary goes into the second pension pillar.
The government is discussing reducing the payments into the second tier. On Monday, 18,000 citizens signed an initiative not to do this in record-short time.
The fact that so many signatures have been collected in such a short time is a signal that the issue of the amount of future pensions is extremely important to society, say the authors of the initiative to maintain second-tier pension contributions at least at the current level. The aim is to prevent the state budget from being tinkered with at the expense of pension savings.
"Pension savings are made by those who work, those who receive salaries every month. These are the people who pay into the second tier of pensions, which they save for their old age. If we spend it now, they will have nothing to live on in their old age. This affects all workers. Everyone, really," says Artūrs Roze, Member of the Board of Indexo Bank.
The proposed tax reform would transfer 1% of the second tier of pensions to the first tier. The first tier is based on the social contributions of today's workers, but it is not a real saving.
No initiative has ever collected the number of signatures required in advance so quickly.
"In this case, we allowed the threshold to be really higher and to gather in order to be sure that the 10,000 legitimate signatures are really there, because this is one of those initiatives that could have mobilized Latvian non-citizens whose signatures are welcome, but in the end they are not taken into account in the Saeima's consideration process," explains Didzis Meļķis, head of the platform "Manabalss.lv".
"On the one hand, this is a miracle. On the other hand, it is a clear sign and signal, and a way to make sure what is really important is what is important," Meļķis says.
Like all public initiatives, this one will initially be examined by the Saeima's Committee on Mandates, Ethics and Submissions, after which it will be transferred to the responsible Committee on Budget and Finance (Taxation), chaired by Jānis Reirs (New Unity). He is a former Finance Minister and a party member of the current Finance Minister, Arvils Åeradens. Reirs believes that the tax reform proposal on pension levels is justified. It does not foresee an overall reduction in pension levels.
"If we look historically, the increase in savings in the first pillar is of course higher than in the second pillar. Because the financial crises that are going through are reducing these savings very much. Believe me, there are also many experts who believe that, in general, all pension savings should be kept at the first level.
"So the government's proposal to transfer 1% - I would like to remind you again, not to reduce, but to transfer from the second tier to the first tier - will not have any impact on future pensions," Reirs said.
One important nuance, however, is that, unlike the first pillar, the second pillar is inheritable in the event of death before retirement.
The 1% transfer from the second to the first pillar is planned to compensate for the reduction in budget revenues caused by the changes in labor taxes.
