LITHUANIA – Lithuania should expand the scope of its pension reform by raising contribution rates, says the International Monetary Fund.

“There is a need to adopt measures that would ensure the long-term viability of the pension system,” the IMF said in a report. “The rapidly ageing population will entail substantial increases in public expenditures for which it is important to prepare.”

“The authorities should expand gradually the scope of the reform by raising contribution rates and making participation mandatory for younger cohorts, fostering the development of private pension funds.”

It added increases in benefits should come from new measures, such as a higher retirement age. And it said that Lithuania needs to set up “appropriate supervision” of pension funds.

Pension reform would stimulate private savings and financial markets, the IMF said.

Lithuania has recently passed a comprehensive set of financial laws allowing for second-pillar pensions and clearing the way for third-pillar pensions and investment funds to operate on a level footing with life insurance.

The significant legal changes took place on July 4, when parliament passed the Law on Pension Accumulation and the Law on Supplementary Voluntary Pension Accumulation. The LPA governs the provisions for second-pillar pension funds contributions. The LSVPA, which amends and re-titles the former Law on Pension Funds passed in 2000, has adapted the EU's UCITS directives into Lithuanian law.

According to the Ministry of Social Security and Labour, the average old-age pension is 344 litas (99 euros).