President Bērziņš passes law to allow recalculating pensions

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President Bērziņš has promulgated the law proposing to recalculate state pensions, in order to prevent negative capital growth from influencing the pensions.

The pensions are to be recalculated starting from 2016. The regulations for reviewing pensions will be set in the state budget law and the mid-term state budget law, according to the available funds. Therefore, the enacted law doesn't include a mechanism for recalculating the pensions, or whether the pensions will be recalculated according to the granting date or the amount of the pension. 

Upon retirement, the size of an individual pension in Latvia is calculated based on the social insurance contribution wage index, also called the capital index. During the financial and economic crisis this index was smaller than 1 and the pensions calculated for people at that time are smaller than those paid to people, who retired during the years of the economic boom when the capital index was higher than 1.

The amendments to the law propose regulating the pension capital, i.e., the accrued social insurance contributions, so that the capital index doesn't fall below 1 during years of economic downturn, and doesn't increase unchecked during periods of intense growth.

There are also proposed amendments for recalculating the pensions for disabled persons and barring people from receiving unemployment benefits and pensions at the same time.

The Welfare Ministry proposes recalculating the pensions based on the year they were granted, while the coalition prefers to start with the smaller pensions below 175 euro next year.

The funds allotted for this end are EUR 4 mln. It will allow either recalculating the pensions granted in 2010 or the ones smaller than 175 euro. The coalition seems to be intent on pursuing the latter.

As reported, PM Straujuma faced quite some criticism from pensioners for her support of recalculations only from 2017.

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