Latvia and Estonia streak ahead
Lithuania’s private pensions system differs in some technical respects from its Latvian and Estonian counterparts, including the completely voluntary nature of the second pillar and its use of a system of individualised accounts. Its compatriots are nevertheless some years ahead in establishing private provision.
Latvia has had third-pillar funds in operation since 1998 and launched its second-pillar programme in 2001. The second pillar is compulsory for all workers under age 30 as of 2001 and otherwise open to those up to age 49. The state treasury acted as sole asset manager until the beginning of 2003, after which participants could elect either to remain with the state or choose one of the six pensions fund managers licensed as of mid-2003. Between them they offer 12 plans. Membership totalled 374,647 as of end-June 2003, of which 11% were voluntary subscribers. Net assets have grown by 14% since the beginning of 2003 to Lats17.8m (e27.7m) by the end of June.
Estonia’s third pillar fund legislation was passed in 1998, with the first fund starting business the following year. Second-pillar funds started operating at the beginning of 2002. The Estonian system is unusual in its large voluntary component – the system is only compulsory for those born after 1 January 1983 and open to all born in or after 1942 – and for that fact that membership demands an extra, 2%, contribution from wages in addition to a 4% diversion of first-pillar contributions. In other schemes in the region the second pillar is funded entirely at the expense of the first pillar. Nevertheless, take-up has been high – well ahead of the government’s initial projections – with 215,390 enrolled by the end of this March, including around half of all voluntary eligible workers, with a further 60,000 expected by the end of the next deadline at the end of October. Accumulated assets totalled EEK303m (e19.4m), with this sum expected to grow to EEK800m by the end of the year.