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The Minister of Social Security and Labor, Monika Navickienė, and the Vilnius University professor, the economist Romas Lazutka, spoke about this on the TV3.lt program “Dienas pjūvis”.
Minister, who needed that new assignment? Why wasn’t it just possible to increase the amount of benefits now available that you plan to provide?
M. Navickienė: Our reviews and research show that the further away, the more loneliness becomes an additional social risk. We see this by comparing poverty rates. For example, lonely retirees living in poverty are twice as likely to be at risk of poverty than those living alone. 47 percent of single and retired people are at risk of poverty.
Both the Government’s program and the priorities of the Ministry of Social Security and Labor are to reduce this risk of poverty and we want to start with those groups in society that experience the greatest poverty. Lonely retirees are precisely that group in society and I think the emergence of this benefit is beginning to partly address the problem of the exclusion of these people.
Mr Lazutka, can this poverty rate really be expected to drop below € 28?
R. Lazutka: The at-risk-of-poverty rate is found among singles, not in all of Lithuania. They form a certain group and the average poverty rate of the Lithuanian population will not change much and this is understandable. I would say that it is not so important to look at the impact on the poverty rate now, because some people receive very low pensions: 250 euros, 280, so if we add those dozens, a large part of them still will not reach the poverty line But it is clear that their lives will ease.
Here it would be more important to analyze how much people spend on those fixed costs and what part their state takes to reimburse them. We know that it is reimbursed through home heating, through the cost of supplying water. This is something to look at, but needs research. I cannot say how much euro is needed to satisfy such a need.
And, in general, much more money is needed to reduce the poverty rate of the entire population or of all retirees. We had calculated that if we paid the so-called gross part of the pension, which is now paid from the state budget, and cut it to the level of minimum consumption needs, around 500 million would be needed. It is not a question of sums at this level at all.
Mrs Navickiene, will it be checked in any way whether the applicants or future beneficiaries of the new benefit actually meet the requirements set out in the bill?
M. Navickienė: Beginning July 1, they will need to submit applications when the benefit goes into effect. The same fact of payment will take place a little later, as soon as Sodra has processed all those requests. We don’t really anticipate any very large verification process yet. Of course, once the implementation begins, we may see some additional aspects that need to be taken into account, but now we believe that the data that is in the Registration Center and will be included in the requests will be sufficient.
It does not say how other pensions will be specifically increased, but it has publicly hinted that the general indexing mechanism now enshrined in law may be revised. Could you explain how you would like or plan to change the current indexing mechanism?
M. Navickienė: One model could perhaps be that faster indexing could be envisaged until a certain level of risk of poverty is reached. And then when it is reached, it might slow down again somehow.
There are several options that could theoretically be considered and are now being considered theoretically, so we will look for the most systematic ones that respond to the Government’s program and the existing problems in the economic and social situation of the elderly.
Professor, if the Minister or the Government asked you for advice, how would you propose to change the current indexation of pensions?
R. Lazutka: We must consider pensions not as a solution to the problem of poverty, but as an instrument to maintain living standards. If wages are going to go up, so should pensions, so that pensions don’t lag behind wage growth, because here we have to look beyond the two groups in society.
The same person is working, reaching retirement age, stopping working, and their income is falling dramatically. It is not rational, it generally makes sense for people to maintain a standard of living throughout their lives, regardless of their economic activity. Not having such a festive period and then a very modest life.
Pensions should be indexed to wage growth, but there is a demographic problem here. If the number of employees decreases, it will no longer be enough to pay rent contributions to maintain that ratio. Our current indexing system was designed based on the assumption that Sodra’s budget would not be in deficit even if the number of employees decreased.
See the full conversation in the video at the beginning of the article.
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