Pensions System in Lithuania: Dilemmas and Controversies

Povilas Gylys


Lithuania faces difficult dilemmas in the field of old age security. Aging population, weak bonds between current wages, salaries and amount of (size of) future pensions causes certain dissatisfactions and risks. They alongside with the pressure of certain interest groups which are interested in possibility to enter financial flows and to take benefits from partial privatization of these flows create certain gnoseological, political and ideological climate surrounding the issue of pension reform. In these circumstances the use of neutral, scientific approach would be helpful. Together with more open, comprehensive, democratic discourse it would add to the rationality, prudence of the decisions concerning the issue. Author of the article argues that the currently functioning pay-as-you-go (PAYG) system together with some shortcomings have its advantages which should not be neglected in the discussion on the pension reforms. On the other hand private pension system based on individual accumulation is not so advantages and effective as its portrayed by its proponents. It is connected with rather high risk both for individuals and for state. The danger of loss of money in the financial markets in case of downfall of the value of securities and the threat to budgetary stability of the country are two major reasons to refrain from overly enthusiastic attitudes towards private, especially mandatory, pension funds. The experience of Argentina, Hungary, Poland should caution us against impulsive, non-comprehensive decision. West European and especially Scandinavian pattern could serve us a good service.


pension funds; pay-as-you-go system; privately funded pension funds; mandatory pension funds; fiscal policy; capital market

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"Public Policy and Administration" ISSN online 2029-2872 / ISSN print 1648-2603