Men in Latvia live on average less than four years after reaching retirement age, which is almost five times less than in Norway and Sweden, while women in Latvia live less than 14 years, which is 10 years less than in Austria, Slovenia, Turkey and France.
It should be emphasized that when using the term "average life expectancy", it should be understood exactly as it is, not applied to each individual, because there are people in the country who live up to a hundred years and more.
This is shown by a/s BDO research, in which the age pension period determined by European countries was compared with the life expectancy of men and women. The study essentially raises more questions than answers. Namely, Latvia is one of the leaders in the whole of Europe in terms of the shortness of life, especially in the men's segment. Since in Latvia, starting from 2014, the retirement age is increased every year by three months until it reaches 65 years (this should happen on January 1, 2025), and if the life expectancy of men in Latvia does not increase, then the so-called stronger sex the average life expectancy in retirement will be around three years - as long as in Russia, which tirelessly sends its men to die in senseless wars.
The difference is measured in ten years
"Statistical data are inexorable, regardless of whether we express indignation, amazement or surprise about them," comments Edgars Volskis, a/s BDO Financial and Risk Consulting Services partner, on the surprising data of the study. He admits that when assessing the life expectancy of men and also women in retirement, the sad place of Latvia should be accepted. "The reasons and causes of such places should be found both in the decisions taken by the state authorities (politicians) and those not yet taken regarding timely and accessible health care, as well as people's own way of life and attitude towards their health and, even more, life," to the question about the reasons why the average life expectancy of men and also women in Latvia differs significantly from the indicators of other European countries, answers E. Volskis.
And what can we wish for, if, according to Eurostat data, men in the EU live a healthy 63.5 years on average, and women 64.5 years, then in Latvia they live 10-12 years shorter - 52.6 years for men and 54.3 years for women . It is undeniable that it is influenced by people's lifestyle - alcohol, tobacco, a set of reckless (reckless) actions, the result of which health suffers - however, it is far from being the only reason, but only one of a series. Namely, you can not drink alcohol, not smoke and not engage in "adventures" dangerous to "health and life", but still not wait until the age from which you can receive an old-age pension, because you have to spend not only months, but in some cases, waiting in the queues for state-paid health care services even a year. Doctors have been raising the alarm about this problem for a long time, but the results are not what they should be. What's more, without war, natural and man-made disasters, Latvia was in third place in the world by the increase in mortality in 2021 (the time when there was a Covid-19 pandemic). Such information or experience for younger people can only serve as an additional motivator to go to work and live in another country.
The retirement age will increase
"The development of medicine has already extended and will continue to extend people's life expectancy, you can see this by looking at how long people lived on average 100 years ago, but it also means a higher bar for the number of years from which people can receive an old-age pension when they cannot work ," explains E. Volskis. He points out that different countries currently set a different age from which they can receive an old-age pension, ‒ in Greece and Denmark it is 67 years, but in Sweden ‒ 62 years, Turkey and Slovenia ‒ 60 years. "In France, the old-age pension is supposed to start at 62, but the government wanted to gradually increase it, which caused a large yellow vest protest movement," explains E. Volskis.
He points out that longer life expectancy is one of the factors that encourage politicians in many countries to carefully but resolutely raise the threshold for receiving an old-age pension. It is true that one should not exaggerate in this area, because the number of years of receiving an old-age pension can already be determined that people lose the motivation to make any payments for pension accumulation. "Especially this applies to state pension systems, which are not inheritable," said E. Volskis. He admits that it is hardly motivating to build up savings for old age, if enjoying them could only last for a few years.
"Definitely, but those people who do not care about their health, safety and life will definitely not think in such a category," so when asked whether the average life expectancy of men is 68.2 years, but the granting of an old-age pension from the age of 65 will demotivate them to pay the mandatory state social insurance contribution payments, answers E. Volskis. He also added that each person has his own life expectancy, which has nothing to do with the arithmetically calculated average.
Retire - you will be poor
Some people who have reached the threshold of years required to receive the old-age pension still continue to work because, firstly, their health condition allows it, secondly, the amount of the pension is so small that a person simply cannot survive on it, thirdly, there is a lack of working hands (in Latvia, approx. 200,000), and more will be missing because there are no new ones to replace the old ones. "The most important indicator is a person's individual net income replaceability level - the ratio of pension to the last salary received before retirement. If the amount of pension to salary reaches the level of 40%, it is a certificate of poverty, if this level is 60-80%, it is optimally good, but if it is 90‒100%, then it is excellent, because in this way a person does not lose his standard of living, but the economy - the consumer," explains E. Volskis. He admits that this issue is particularly relevant in times of rapid inflation.
"Wage growth is on average 3% every year, which means that the growth of pension assets should be at least 6%, which smooths out economic fluctuations during savings in 40‒45 years," explains E. Volskis. He admits that, compared to the old EU member states, Latvia has experienced a much faster rise in prices over the last 20-25 years, and therefore the return of one lat or one euro invested at the time, compared to the moment of the purchasing power of that investment, is lower than it would have been. elsewhere. "There is a small number of pensioners in Latvia whose pension exceeds 1,000 euros, but for most of them its amount barely allows them to survive, or they are forced to rely on the support of their children or grandchildren," concludes E. Volskis.
No faith in the existing system
Currently, Latvia has a mixed pension system, where the state (or so-called) first-level pension (paid as part of the person's mandatory state social insurance contributions) is mandatory, the second-level pension, which is generated in the amount of 6% of VSAOI contributions, the third-level - one's own person's payments (the amount of personal income tax paid can be recovered) to private pension managers. "There are also two other pension savings mechanisms - human investments in land (forest), buildings, precious metals, works of art that can be converted into money - means of living - as well as children - the more children, the greater the chance of receiving support from them in old age ," states E. Volskis.
He admits that first-level pensions in Latvia are not inheritable and when a person dies, they remain with the state, second-level pensions are inheritable, but 27 pension plans, which have 10 private pension managers, "live" in the red. "It sounds strange, but in Slovenia, with exactly the same population, only a much larger economy, there are two pension plans and one of their managers is a state person, they are listed on the Frankfurt Stock Exchange and operate at a profit," he points to the paradoxical situation with the management of second-level pension plans in Latvia E. Volski. He draws attention to the fact that this only raises questions about the activity of second-level pension managers and people's motivation (there is no free choice, there is a forced order) to get involved in them. "It is no surprise that wealthy people, investing on their own, get better results than the private pension managers in Latvia are able to achieve, essentially thus preparing the ground for a conversation about the need for a major overhaul of the current system," explains E. Volskis.
He admits that in the future, the level of state pensions will not even be able to provide the minimum necessary for human survival, which will force people to look for alternatives in private pension insurance. "There are countries in which today there is no state pension insurance system (China, India, also the USA), but there is a private one, Latvia currently has a mixed system - state and private," explains E. Volskis. In his opinion, second-level private pension management in Latvia is not comparable to the USA, where the investor has enormous rights in managing his pension savings.
"Pension funds, which invest 80% in bonds with a fixed income level," answers E. Volskis to the question of what is the most beneficial solution. He reminds that a lot of companies, whose shares were once invested by pension managers, have long since ceased to exist. There is a risk that similar events may repeat themselves with shares of today's very attractive companies. No one can predict whether they will exist and work successfully in 10, 20 or 30 years.
Source: Dienas Bizness