Adequacy and Sustainability of Future Retirement Pensions in the Baltics: Analysis Based on Lithuania

ABSTRACT The paper contributes to the current debates about the future of retirement pension systems in ageing European societies. Most of the countries in Europe provide the possibility for future retirees to have income at retirement from at least two (or three) pension pillars. Thus, the discussion on the role of the state in encouraging the development of private pension schemes in the Baltics is very relevant now, when political decisions are being made concerning the future of retirement pensions in the countries. Future trends of retirement pensions in Lithuania are analysed in terms of their sustainability and adequacy from two perspectives. First, the contribution rate is fixed when the pension is organised differently in terms of financing methods and sources. Second, the pension replacement rate is fixed, and the necessary contribution rates are assessed to keep it constant. Integration of multiple pension financing sources into the modelling scenarios of possible pension development in terms of their adequacy and sustainability adds novelty to the approach to this topic. The results of the analysis show that different distributions of the contribution among pension pillars financed by different financing methods and sources produce different incomes at retirement or that a constant pension replacement rate is achieved by different contribution rates depending on their sources and financing methods.