Thirteenth Pension Experts: Has the Government Borrowed Too Much and Has Nowhere to Put It? | Deal

The rulers, who distributed a single benefit of 200 euros to retirees in August, criticized by economists, spoke of a new pension 13, also worth 200 euros, which would reach the beneficiaries before St. Christmas.

On Thursday, the Seimas accepted for consideration the proposal of the members of the faction of the Lithuanian Polish Electoral Action Union of Christian Families (LLRA-KŠS) on pension number 13. Prime Minister Saulius Skvernelis and the leader of the “peasants “Ramūnas Karbauskis also agree with such a benefit.

R. Karbauskis told reporters that he believed Lithuania could afford to pay the 13th pension, and the prime minister stated that it would be possible to talk about the sources from which the additional benefit would be funded after the elections.

Although initially one of the initiators of the bill, Zbignev Jedinskis, a member of the LLRA-KŠS faction, told reporters that such payments would require 120 million. According to the Ministry of Social Security and Labor, this decision would require 172 million euros. euros. The benefit would be received by about 600 thousand. population.

Economists view the 13th pension offer as a desire to attract as many voters as possible before the election, but doubt such a law can be passed.

I do not understand why 200 euros

Tadas Povilauskas, an economist at SEB Bank, sees the idea of ​​pension number 13 as an attempt to create a better image before the next Seimas election simply by applying the lump sum payment template paid in September.

The current offer has been simply copied from the lump sum payment to pensioners in August –only the same amount of 200 euros remains–, says T. Povilauskas.

“The current offer is simply copied from the lump sum for retirees in August, which leaves the same figure of 200 euros. Do not even try to think, relate to something”, – 15 minutes wondered the economist.

Such a proposal also surprises one of the authors of the current pension indexation system, Vilnius University professor Teodoras Medaiskis, who claims that the payment of pension 13 would destroy and compromise the entire pension system.

According to him, the decision to distribute the same benefit to all, regardless of the length of service, the previous service, further flattens the already flat pension system. After all, the more a resident pays contributions to Sodra in Lithuania, the relatively smaller part of her previous salary is retired.

“I think it is a bribe to the voters before the elections and a completely unnecessary decision: if there is money, then the 12 pensions must be increased. What does the 13th pension mean? If you pay one, the remaining 12 will be reduced or not increased as much as they could.

As a result, people are being lied to: instead of increasing their monthly pensions by an amount that can be increased, it is presented as a gift. This damages the pension system and introduces chaos in the pension system “, 15 minutes said T. Medaiskis.

People are being lied to: instead of increasing their monthly pensions by an amount that can be increased, it is presented as a gift. In this way, the pension system is damaged, T. Mediskis is convinced.

He also points out that a pension increased in just one month can be used irrationally.

And I will change the pension number 13 according to prof. Dr. Linas Čekanavičius emphasizes that a person with a pension of 300 euros and a pension of 1000 euros will receive pension number 13.

“All these changes – the pension 13, paid 200 euros to retirees, the proposals of President Gitan Nausėda to reduce the Personal Income Tax are the product of a meager and primitive populism,” said the economist.

All these changes – the pension 13, paid 200 euros to pensioners, Gitan Nausėda’s proposals to reduce personal income tax, are a small product of primitive populism, the economist evaluated the proposals.

“If you have nowhere to put your money, you need to support those who have lost their income completely because they have been laid off or lost it. Retirees are not experiencing financial difficulties greater than a year ago, why did no one have this idea a year ago? In this case, did you borrow too much and there is nowhere to put? Maybe then it will be possible to go back, not splash, especially before the elections, ”he said. 15 minutes added L.Čekanavičius.

The economist even proposes introducing a moratorium on all money distributions until one or two months after the elections.

“When the government forms a new budget, it will assess the need for reserves,” believes L. Čekanavičius.

Offers to increase indexing

Both T. Mededais and T. Povilauskas emphasize that small pensions in Lithuania are a problem, but they should be increased through existing mechanisms, for example by increasing the indexation coefficient. Meanwhile, current proposals to introduce a 13th pension and seek funding sources later are unjustified.

“Those 200 euros are not linked to anyone, neither the minimum pension nor the minimum wage. If we want to solve the problem, we can do it through the Pensions Law, there is the so-called pension indexing formula, so it is possible to increase the coefficient, not through lump sums incompatible with the sources of financing “, emphasized T Povilauskas.

Poles and Slovaks did the same

It seems that the rulers of this idea were able to look away from other Central European countries, where this trump card was also drawn before the elections.

T. Povilauskas points out that Slovakia approved pension number 13 in February, four days before the parliamentary elections. In February, five months before the presidential elections, Poland also enacted a pension number 13.

“Most realized that it was an attempt to bribe retirees. The idea of ​​the 14th pension from 2021 is already floating in Poland, ”says T. Povilauskas.

There may be a risk of higher fees

According to the economist, 172 million. It is not sensible to commit such an amount without tying it to any figure in the future. Such a proposal breaks with Sodra’s current pension financing system, which collects taxes and redistributes them to pension recipients.

“We have to increase pensions, whether they are for old age, incapacity for work or widows, as much as economic possibilities allow. But those millions of euros should not suddenly commit to the future without fuses and bonds. I think the government will not be in a hurry to win it, I would very much doubt that he would leave at the end of the year before the adoption ”, expected the economist.

Laura Galdikienė, Chief Economist of the Bank of Lithuania’s Macroeconomics and Forecasting Division, also suggests considering how additional liabilities will be financed.

The economist agrees that in Lithuania, older people face the problem of low pensions and the consequent poverty of the population of retirement age, so this situation requires the attention of policy makers. However, he suggests addressing this problem by assessing the long-term consequences of the chosen measures for public finances and the economy.

“It is important to anticipate not only how much a 13th pension would cost, but also from what sources these additional liabilities would be funded. It is also necessary to pay attention to the fact that the demographic situation in Lithuania will deteriorate in the future: the population of retirement age will increase, so the need for funds to meet these new and other obligations related to aging society will increase every year ”, 15 minutes commented the expert.

L. Galdikienė emphasized that the public will have to pay for this increase in public spending before elections in the future, as these liabilities can increase government debt and its service costs, reduce the possibilities of financing other public services and increase the need to increase taxes.

L. Galdikienė recalled that the situation of public finances will also deteriorate due to the consequences caused by the pandemic: this year alone, the debt of public administrations will increase by approximately 10%. p., will reach about 47 percent this year. GDP and will be the largest in the country’s history.

However, the interlocutors expressed doubts that such a law could be passed.

From 2021 January 1 the thirteenth pension would be paid in December of the current calendar year. According to the initiators, the bill would require about 180 million. budget for the first year of validity.

The Seimas decided to request the Government to conclude this project. It is planned to return to the debate on this issue at the Seimas session on 10 November.