The Lithuanian government on Wednesday approved changes to the second-pillar retirement saving system, including a proposal to scrap automatic enrollment, allow people to opt out, and retain the state's 1.5 percent contribution for those who continue saving.
The proposed amendments to the Law on the Accumulation of Pensions, drafted by the Social Security and Labour Ministry, would give people two opportunities to opt out of the pension funds – between January and September of 2026 and the same period in 2027.
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"The system we're proposing is balanced and sustainable," Social Security and Labour Minister Inga Ruginienė told reporters after the cabinet meeting.
"It's aimed at greater encouragement to additional saving, building greater confidence in additional saving, and making the system much more attractive than it is now through flexibility and the ability to manage one's own money," she said.
She expects the parliament to pass the amendments by July 1 so they could take effect on January 1 next year.
The amendments would allow participants who are not satisfied with the new rules to leave the system and withdraw their past contributions along with investment returns.
According to Ruginiene, funds withdrawn during the transition period would not be taxed. In the future, those who stay in the system but later choose to withdraw part of their savings would pay a 3 percent exit fee.
Participants who opt to stay would be offered more flexibility. They would be able to pause their contributions indefinitely for certain reasons and choose what share of their salary to allocate for saving.
They would also be allowed to withdraw 25 percent of their accumulated savings once in their lifetime, but no more than the amount they contributed.
On Tuesday, the Lithuanian Confederation of Employers, the Confederation of Industrialists, the Business Confederation, the Association of Financial Analysts, the Investors' Forum, and six other organisations reiterated their warning that these proposals would undermine the entire system.
The Constitutional Court ruled in March last year that the absence of a legal provision allowing people to terminate their retirement saving contract for important reasons was unconstitutional.
Currently, 1.42 million people are enrolled in the second-pillar pension system.
Data from the state social insurance fund, Sodra, as of December 2024 showed that around 774,000 people, or 54.5 percent of all participants, had made contributions to their pension accounts.
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