| Abstract [eng] |
The rapidly ageing population structure, long-term emigration and low birth rates are putting increasing pressure on the financial sustainability of the Lithuanian pension system. This Master's thesis analyses the demographic and economic factors affecting the sustainability of the pension system and assesses possible policy options to ensure the long-term stability of the system. The unfavourable demographic structure will lead to a declining working-age population and a steady increase in the proportion of pensioners in society. At the same time, increasing life expectancy will extend the duration of pension payments, which will increase the social security costs for old-age pensions. In the VK scenario, these costs are projected to reach 9,4 % of GDP in 2050, of which as much as 8,2 % will be for old-age pensions. This trend will significantly increase the pressure on public finances and threaten the long-term sustainability of the pension system. The analysis of the sustainability of the pension system was carried out using a microsimulation model, which allows to assess the impact of demographic and economic factors and policy decisions on replacement rates and the structure of pension benefits. The results show that by 2070, the overall replacement rate could fall from 53,1 % to 40,1 %, and for non-participants in Pillar II to as low as 31,2 %, while increasing the Pillar II contribution rate to 5 %, 7 %, or 10 % has a limited impact on the weighted replacement rate due to the low level of participation. More significant results can be achieved by strengthening Pillar I and by additional indexation of the individual pension component. With additional indexation of 2 %, the total replacement rate could reach 52,7 % in 2070, and 70,6 % for Pillar II contributors. However, such an outcome would require significantly higher contributions – the social security rate could rise to 13 % compared to the current 8.72 %. The analysis also revealed that the proposed reform of Pillar II, which would allow individuals to opt out of saving, could have adverse consequences. As Pillar II is intended to complement Pillar I and enhance pension adequacy in old age, participant withdrawals would undermine the overall effectiveness of the system. Model simulations indicate that the replacement rate would decline under all withdrawal scenarios. In the event that 60 % of participants choose to exit the scheme, the weighted replacement rate is projected to decrease by as much as 5.3 % by 2070. |
