The new year requires politicians to take decisive action on pensions

The new year has brought significant changes in the social field. They are mainly related to changes in social security for pensioners and people with disabilities. In 2020, significant decisions were made by the Constitutional Court, declaring as inconsistent with the Constitution a number of existing legal norms regarding pensions and benefits, as well as the guaranteed minimum income.
04.01.2021. Inga Paparde
INCREASING minimum pensions is one job that has been done, but to understand and answer the question of what the minimum income must be in order to correspond with a dignified life – that must be done in 2021. ©Dmitrijs SUĻŽICS, F64 Photo Agency

However, this year will be even more important for social policymakers and politicians than last year, as almost the entire pension and benefit system needs to be reassessed and reformed.

Changing the poverty threshold

Regarding the thresholds for guaranteed minimum income and determining the state of poverty, it must be concluded that social policymakers (for example, the Ministry of Welfare) have addressed this issue even before the Constitutional Court legal proceedings in the social field, submitting concept after concept to the government for several years. However, only after repeated warnings from the Ombudsman and the proceedings of the Constitutional Court did at least some progress begin in resolving these issues.

Thus, in 2021, the guaranteed minimum income level will be 109 euros instead of the current 64 euros for the first or only person in the household and 76 euros for other persons in the household. The income threshold for a poor household will be 272 euros for the first or only person in the household and 190 euros for other people in the household. On the other hand, the rules regarding the income threshold of low-income households are less clear, as only a few municipalities have set it, while also providing adequate social support. According to the information provided by the Ministry of Welfare, this year each municipality will be entitled (thus not obligated) to set the low-income threshold not higher than 436 euros for the first or only person in the household and 305 euros for other persons in the household, but not lower than the poor household income threshold.

The retirement age is already 64 years

The reform of the retirement age in Latvia is continuing, and in 2021, persons who have reached the age of 64 will be entitled to a state old-age pension, but in order to receive a state old-age pension, the insurance period must be at least 15 years.

The law On State Pensions still retains the possibility for persons whose insurance record is not less than 30 years to retire early, i.e., two years before reaching the general retirement age. So this year, people who have reached the age of 62 will be able to retire early.

It should be reminded that from 2014 the retirement age in Latvia has gradually increased - every year by three months, until 2025, when the age of 65 will be reached.

The minimum pension is higher but depends on the length of employment

In the new year, many seniors will start receiving higher minimum pensions, although, in order to recalculate them according to the length of employment of the senior, public authorities need a transition period, so people will receive the larger pensions only in May. The pension supplement will also be paid for the first four months of the year.

The new minimum old-age pension amounts will in the future depend on each year of insurance. The minimum old-age pension is calculated by applying a coefficient of 1.1 to the minimum old-age pension calculation base of 136 euros (163 euros for persons with disabilities from childhood) and for each subsequent year exceeding the 15 years that are required for granting the old-age pension, increasing the amount by two percent of the calculation base.

New amounts for the minimum disability pension

The Ministry of Welfare also informs that new minimum amounts of disability pension have been set, which will be calculated on the disability pension calculation base of 136 euros, but for people with disabilities from childhood - 163 euros. The minimum disability pension will depend on the disability group. In the case of the Group III disability, the disability pension will be at the base level of the pension calculation, i.e., 136 or 163 euros. The amount of the Group II disability pension may not be less than the disability pension calculation base of 136 euros, to which a coefficient of 1.4 has been applied. Thus, in this case, the minimum amount of the disability pension will be 190.40 euros, but for persons with disabilities since childhood - 228.20 euros.

The amount of the Group I disability pension may not be less than the disability pension calculation base, to which a coefficient of 1.6 will be applied. Consequently, the minimum amount of the disability pension will be 217.60 euros, but for persons with disabilities since childhood - 260.80 euros.

As the amount of disability pensions increases, the minimum amounts of compensation for loss of ability to work due to an accident at work or an occupational disease will also increase, as the amounts of compensation may not be lower than the minimum pension for the relevant disability group.

From 2021, support for children after a loss of supporter will be increased - for children under the age of seven it will be 136 euros, but for children from the age of seven - 163 euros.

Chernobyl participants receive 9 euros more

A number of people are not entitled to pensions, so they are granted a state social security benefit, the minimum amounts of which have also been changed in 2021. For persons who have reached retirement age and have not acquired the right to an old-age pension, this benefit will be 109 euros per month this year (previously it was 64 euros). The amount of the benefit will vary depending on the disability group and whether the person is working.

For persons with a Group III disability, the benefit will be in the basic amount - 109 euros, with Group II disability - 130.80 euros, but with Group I - 152.60 euros. If the disabled person does not work, there will be a supplement to the benefit: an additional 30 percent for Group I disability and an additional 20 percent for Group II. There will be higher benefits for people with disabilities since childhood: 136 euros (Group III disability), 163.20 euros (Group II), 190.40 euros (Group I).

The state social benefit for people who participated in the liquidation of the consequences of the accident of Chernobyl nuclear power plant or the family member of the deceased victim has been increased by only nine euros, which will be 109 euros per month instead of the current 100 euros.

Debatable issues

The government's decision to review these minimum pensions at least every three years sparked a debate in the parliament when discussing the minimum amounts of pensions. This means that it can only be legally done every three years. This position of the government was criticized by the Ombudsman, reminding that so far the issues of minimum provisions for pensioners and the poor have not been decided by the government on a regular basis, of course, in accordance with the real economic situation and now such a norm in the law again allows to delay the revision of the minimum amount. It also means that the government could take into account three-year-old data when setting the minimum amounts, so the minimum amounts of pensions will not correspond to the socio-economic reality. True, it is not clear whether they correspond to this now, in 2021, even though they have been significantly increased.