Lithuania’s Social Security and Labour Ministry has unveiled proposed changes to the country’s second-pillar pension system. Here is an overview of the key reforms.
All proposals are subject to approval – and likely changes – by the parliament.
Voluntary participation only
Until now, people were enrolled into the second-pillar pensions system automatically. This meant contributing 3 percent of your gross salary to a private pension fund, which would be matched by a 1.5 percent additional contribution by the state.
The government has now proposed scrapping the automatic enrolment. Instead, people would receive regular reminders about the possibility of joining.
Those wishing to participate would have to sign a contract independently with their chosen pension fund.
Opting out of existing participants
Current participants in the second-pillar pension scheme would be allowed to opt-out if they are dissatisfied with the revised conditions.
Requests to withdraw from the system would be processed within three months. Those opting out would be entitled to withdraw their contributions along with investment returns.
Meanwhile, state-funded contributions made by the social security fund SoDra would be transferred back to the state pension system.
Flexible contribution rates
Participants would be able to choose whether to contribute 3% or a higher percentage of their gross salary to their pension fund. Contribution levels could be increased or reduced to 3% at any time during the saving period.
Option to pause
Individuals facing financial difficulties could suspend contributions for a year, with the possibility of extending the suspension period.
Continued state contributions
The state would continue to supplement personal contributions. The contribution rate remains unchanged at 1.5% of the country’s average wage from two years prior. In 2025, this amounts to €30.33.
Early withdrawal of partial funds
Participants would have the option to withdraw up to 25% of their accumulated savings before reaching the state pension age. However, this withdrawal could not exceed the total amount they had personally contributed. A 3% administrative fee would apply, calculated based on the withdrawn amount.
Full withdrawal before retirement
Participants within five years of retirement would be permitted to withdraw their entire savings if the accumulated amount is relatively small. A 3% administrative fee would apply.
Full withdrawals before reaching pension age would also be allowed in exceptional cases where saving becomes impractical or unnecessary. The ministry identifies three such circumstances:
– A loss of 70–100% working capacity (previously referred to as disability);
– A diagnosis of a severe illness included in the Health Ministry’s list of critical conditions;
– The need for palliative care.
Withdrawals under these conditions would be exempt from income tax and other charges.
Centralised website
The government plans to upgrade the SoDra website, consolidating all pension-related data in one place. People would be able to access details of their entitlements across all pension pillars, adjust, suspend, or resume contributions, compare pension funds, calculate projected pensions, and review expected payouts from second-pillar funds before and after retirement.
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