The Effectiveness of the Pension System in Latvia: pensioner’s point of view

摘要

Purpose system, which is considered the most progressive and modern system in the world, for thepensioners themselves.Scientific aim The aim of the paper is to analyze the effectiveness of the Latvian pension system andfind out minimal values of the initial parameters, which have an influence on the effectiveness, tomake a pension system more effective for pensioners within corresponding Latvian legislation.Methodology/methods The analysis is based on the comparison of the advantages and disadvantagesof the hierarchical structure of the Latvian pension system and modeling basic financial parameters toreveal its influence on generating financial flows for pension funds and the effectiveness of each pensiontier in the final analysis.Findings The findings prove non-effectiveness of the Latvian pension system for the needs of pensioners.Depending on the tier of the pension system pension money generating by future pensionersare non-effectively managed by all pension funds. Modeling future pension payoffs shows theboundaries of the effectiveness of the pension system paying attention to the needs of future pensioners.Also the results bring to light an interesting idea how a future pensioner can manage his own freeassets very easily and more effective than professional participants maintaining the pension system inLatvia.Conclusions The represented results expose the problems with the effectiveness of the Latvian pensionsystem from future pensioners‘ point of view and do not consider the problems from government’sside. It was shown that the effectiveness of the Latvian pension system could be improved andusing the peculiarities of the Latvian economy a future pensioner can be more effective in his freemoney management than professional participants.