Latvia’s government wants to begin raising the Baltic country’s pension age two years earlier than planned, as a shrinking population weighs on public finances.
The current age of 62 would start to increase in 2014 rather than 2016, pending approval by parliament, Prime Minister Valdis Dombrovskis told a news conference today in the capital, Riga. Plans to raise it to 65 by 2020 remain in place, he added.
Demographic issues have “introduced corrections to the calculations for the social system’s sustainability,” while 20 million lati ($38.5 million) in early-retirement costs have been incurred, Dombrovskis said. Latvia’s population shrank to about 2.1 million in 2011 from 2.4 million in 2000, census data show.
Latvian courts overturned a government bid to cut pensions in 2009 after the end of a real-estate bubble and the withdrawal of foreign credit triggered a recession, forcing the country to seek a 7.5 billion-euro ($10.1 billion) bailout. Increasing the pension age before January 2015 will prompt more people to retire early, which risks “destabilizing the social-insurance budget,” the World Bank said in 2010.
Latvia raised pension allowances too quickly when its economy was growing from 2000 to 2008 and should seek to recover some of those gains, the World Bank recommended at that time.