Pension system in Latvia

We all know – one should not think about pension in a last moment. Therefore GE Money Pensija would like to help You to achieve possibly higher life level when retiring. Some researches show that after retirement a person needs approximately 70% of one’s previous income. However, state pension won’t be able to ensure such life level for you therefore You have to think about your pension yourself so that when retiring you would be able to enjoy well-deserved repose without worries.

There is 3-pillar pension system in Latvia. The first two levels are compulsory, and the state takes care of them as they are formed from social tax payments. The third pension pillar is voluntary and allows you to achieve maximum pension amount when retiring. 

1st pillar. Mandatory State Non-funded Pension Scheme.

 Entire working population, for which social contributions are made, is involved in the 1st pension pillar. We work now and thus pay pension to present pensioners. Pension is based on the principle – the longer period I work, the bigger pension I receive.

2nd pillar. Mandatory State Funded Pension Scheme.

 The 2nd pillar pension is  a possibility provided by the state  to increase one’s pension. Part of social insurance contributions for age pension is invested in financial and capital market (shares and other securities) to ensure possibly more rapid investment value growth. Real money is accrued on participant’s account, which grows according to investment value growth and is not paid out to existing pensioners. Every person born from 2 July 1951 to 1 July in 1971 can voluntarily join the 2nd pension pillar. Participation in the 2nd pillar pension is mandatory for people born after 1 July 1971.

3rd pillar. Private Pension Plan.

 Private pension fund is an opportunity for everyone to create additional voluntary savings to ensure higher pension and more carefree life in old age. One can make contributions to the 3rd pillar on one’s own or with employer’s mediation. Participation in the 3rd pillar does not create considerable costs today, and taking advantage of tax benefits You can considerably improve your welfare in old age. Besides You can receive saved pension capital already at the age of 55 if necessary.