Challenges烬nd燘enefits.PDF

        Reforms of Baltic States Pension Systems:  Reforms of Baltic States Pension Systems:  Challenges and Benefits  Challenges and Benefits   Author:  Dr. Edgars Volskis 7 December 2012 Tallinn, Estonia 1    Table of Contents    Abbrevations  2  Abstract  3  Latvian Pension system reform  5  Estonian Pension System Reform  10  Lithuanian Pension System Reform  14  Common Success Stories and Failures of Funded Schemes of Three Baltic States  19  Future Perspectives  24  Conclusions and recommendations  28    1    Abbrevations  EU – European Union EUR – euro LVL – Latvian Lat LTL – Lithuanian Lit EEK – Estonian Krona GDP – Gross domestic product NDC – Notional defined contribution FDC – Financial defined contribution PAYG – Pay as you go DC – Defined contribution 2    Abstract  After collapse of Soviet Union in 1991 all three Baltic States Estonia, Latvia and Lithuania inherited their social security systems from the old Soviet Union system, which was characterized by low retirement age (55 for women, 60 for men), high income replacement rates (ranging from 50-100% of previous monthly income) and financing of pension expenditures directly from state budget. Because the systems were recognized financially unsustainable and not properly equipped to face the existing and growing socioeconomic and demographic risks with the aging population and decreasing fertility rates