Lithuania has eschewed the Polish model of welfare reform with plans for a supplementary 2nd and 3rd pillar system. Legislation is currently being drafted by Dr Romas Lazutka, director of the Social Insurance Training and Research Centre in Vilnius.
The draft sets up both publicly available private funds and closed company funds which must be non-profit making. It is currently a matter for debate whether to create local government and public body closed funds. Lazutka, who expects the draft to be passed to the government in the new year, said that it was likely that the system would involve a tax exemption for employers' and employees' contributions with the final pension subject to tax.
The Ministry of Finance is reluctant to give an exemption on any investment income but is is included in the draft law at the moment," he added.
The government plans to compensate citizens who lost savings when the country broke away from Russia (and from Russian banks), and there is a proposal to use the pension funds as a non-inflationary investment vehicle for this money."