LITHUANIA - The level of contributions going into Lithuanian second pillar pension funds should be raised to 10% of salary from the current 5.5%, a conference was told earlier this week.

The proposal found members of Lithuania's fragile minority coalition government on opposite sides of the debate.

The conference was organised in Vilnius by local think-tank, the Lithuanian Free Market Institute (LFMI) and sponsored by the Liberal and Centre Union (LiCS), a right-of-centre party that is a junior member of the government.

The issue was a question of political will, said deputy parliamentary speaker, Gintaras Steponavicius, a member of the LiCS. "More radical steps, like the increase of contribution levels, could be implemented now without disturbing fiscal stability," he said.

However, the head of the parliamentary social affairs committee, Algirdas Sysas, a deputy for the left-of-centre Social Democrat Party (LSDP), the leading party in the coalition, opposed any increase. The group is a descendent of the Soviet-era communist party.

Under the Lithuanian system, employers pay 31% of an employee's gross salary to the State Social Insurance Office (SoDra) and the employee pays an additional 3%. Of this, 18 percentage points goes to the old age pensions system. A 2003 pension reform allowed individuals to redirect 2.5% of their salary away from SoDra and into a private pension fund of their choice. The legislation laid down a 1% of a salary increase in the contribution rate a year to the current 5.5% by 2007. However, no further increases were foreseen.

LFMI vice-president, Guoda Steponaviciene told the conference that the pension reform had been a good start but that it needed further enhancement within near future.

"If this is not done the social security system would face major problems from 2025," she said.

Steponaviciene added that now was the optimum time to take such steps because the SoDra was currently in surplus, the state had a very low debt level and the fiscal situation was healthy.