Although the average pension in Latvia is EUR 576, every fourth senior has to live on a monthly pension of only EUR 400 to EUR 500. A more positive situation is observed in neighbouring Baltic countries, where, for example, the average pension amount in Estonia is almost EUR 200 higher.
According to Atis Krūmiņš, Head of Luminor Asset Management and Pension Companies, comparing the average pension level in Latvia with those of neighbouring countries, it can be seen that Lithuanian and Estonian seniors are one step ahead of their Latvian neighbours in terms of well-being.
The biggest pensions – in Estonia
Already at the beginning of the year, it was reported that Estonia will experience the fastest rise in pensions in the last 15 years. Since the beginning of April, the average pension has increased from EUR 700 to EUR 774 and, according to pension expert Atis Krūmiņš, this is the highest average pension indicator in all the Baltic States. The increase in the average pension is also observed in Lithuania, where it has increased to EUR 596 this year.
Despite the fact that the average pension amount in Latvia has increased over the past years, seniors in the country are still behind their Baltic neighbours, as the average pension amount in Latvia is EUR 567. Still, the number of pensioners whose pension amount is relatively high is on a rise in the country. Almost 31 000 pensioners in Latvia receive a pension of between EUR 1 000 and EUR 2 000.
Although Latvia has one of the lowest average pension levels, the data shows that among the Baltic States we are distinguished by the highest pension substitutability coefficient – this coefficient reflects the ratio of newly granted pensions to the average salary in the country.
In Latvia, the pension paid by the state accounts for 52.8% of the income to date. In Estonia, this indicator is only 34.4%, which is the second lowest result in the European Union immediately after Lithuania. Meanwhile, the average European Union indicator shows that upon reaching retirement age, seniors will receive an average pension of 68.1% of the previous salary.
However, although Latvia has the highest rate among neighbouring countries, the indicated amount of pension will not be able to provide the level of income to which a working person is accustomed. That is why the pension expert of Luminor Bank reminds that in order to ensure financially prosperous old age, regardless of the contributions of the 1st and 2nd pension pillar, it is recommended to create additional pension savings, for example, by making contributions to the 3rd pension pillar or investing in various financial assets. It is also important to choose the most age-appropriate 2nd and 3rd pension level plans – pension plans with a high proportion of investments in shares are the most suitable choice for younger people, but if the retirement age is closer, then it is recommended to choose less risky plans.