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Pension plans in Riga

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Since 2001 Latvia has a three tier pension system.

The first tier is the compulsory state unfunded pension scheme.

The second tier is a state funded pension scheme. The pension capital collected by the state, i.e., 20% of the income, is distributed between the first and the second tiers.

The third tier is a private and voluntary pension scheme.

The system works based on the principle: the more one contributes during their working years, the larger the pension once they retire.

Until the end of 2013 the retirement age in Latvia was 62 years. From January 2014 the retirement age is increased by three months every year until it reaches 65 years in January 2025. The minimal period of time of contributing to social insurance is 15 years; those who have contributed for at least 30 years can choose to retire two years before reaching the official retirement age.

First Tier

Everyone working in Latvia and making social insurance contributions are automatically involved in the 1st tier of the pension system. The contributions made by the workforce are used for paying old age pensions to those currently retired.

Second Tier

Participation in the second tier is compulsory for those born after 1st July 1971. From the 20% of income that are collected as a part of the pension capital, 15% are allocated to the first tear and 5% to the second tier (from 2016 accordingly 14% and 6%). This money is then invested into shares, bonds, and other securities, or can serve as a bank deposit. Each taxpayer can freely choose a fund manager and an investment plan for handling the funds in their personal account. The private fund managers are supervised by the Finance and Capital Market Commission and it is allowed to change the fund manager once a year.

Upon retiring, a person can choose whether to add these funds to their first tier pension and receive them bother together, or to entrust it to an insurance company of their choice and receive the payments separately.

Third Tier

The third tier is voluntary and foresees the possibility of making additional retirement savings in private pension funds. There are two types of private pension funds, both mainly invest in stock markets and fixed income securities markets:

  • Closed funds established and run by a company or an organization and available only to its employees
  • Open funds established by a bank or an insurance company that are available for everyone, and that be joined either directly or through an employer

For more information of the three tiers of the Latvian pension system please consult the information prepared by the State Social Insurance Agency.

Expat Pension Plans

As Latvia is a member of the EU and the EEA, it has bilateral agreements with other EU countries, as well as Iceland, Lichtenstein, Norway and Switzerland, that allows for years worked in these countries (and vice versa) to count towards their pension. You have to apply to the pension authority in the country where you live or where you last worked, and this authority will be responsible for assembling the records from all countries where you have worked. For more details on the procedure consult the Your Europe guide and the information prepared by the State Social Insurance Agency.

If your country does not allow for years worked in Latvia to count toward your state pension, there may be an opportunity to buy back time once you have returned to your home country and are once again contributing to the pension plan. Again, inquire with your state plan about the particulars.

Update 26/08/2015


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