Pension increase dilemma: use Sodra reserve or save it for the future

A new coalition in Lithuania has pledged to accelerate pension increases by using surplus funds from the Sodra reserve, intended for crisis resilience, LRT reports. President Gitanas Nausėda previously proposed a similar plan, suggesting slower reserve accumulation to redirect some funds to current pensioners.

Democrat faction member Linas Kukuraitis argues that 40% of seniors live in poverty, along with many disabled individuals relying on Sodra benefits. “We have double the poverty rate for these groups compared to the EU average,” he said.

However, the Bank of Lithuania, the National Audit Office, and Sodra itself warn against tapping the reserve. Economist Jaroslavas Mečkovskis of the National Audit Office’s Fiscal Surveillance Centre explains that the reserve includes temporary returns from second-pillar pension withdrawals, which must eventually be repaid. He adds that demographic aging will strain the system, potentially depleting the reserve over time.

Kotryna Tamoševičienė, deputy director of the Bank of Lithuania’s Economics Department, states that even with current contribution rates, pension indexation may need to be halted by 2030 due to demographic pressures. “Under the current indexation rule, if expenditures exceed revenues, indexation would have to stop,” she said.

Conservative MP Mindaugas Lingė warns that without action, the Sodra reserve could be exhausted by 2050 due to demographic trends. Social Democrat Algirdas Sysas, chair of the Budget and Finance Committee, hopes institutional assessments will temper political promises. “There’s an endless desire to please voters, but we can only increase pensions if the funds are available,” he said.