Jul 28, 2023
Annual pension increase compared to 'a bandage on a corpse' / Article
Everyone who receives a pension – old-age, retirement, survivor, or disability pension – will receive a modest increase as of October 1. The amount that will be indexed is EUR 609. All pensions will
Everyone who receives a pension – old-age, retirement, survivor, or disability pension – will receive a modest increase as of October 1. The amount that will be indexed is EUR 609.
All pensions will grow slightly. If the pension is above EUR 609, the increase will not exceed EUR 38.98 before tax. There are also some exceptions.
"The amount of the pension, which is €609, will actually rise by 29 euro 60 cents after the income tax. Of course, there are exceptions, so the exception is the politically repressed persons, the first group disabled person and the Chornobyl nuclear power plant catastrophe clearing participants whose pensions are indexed to the full extent,” said Egita Garā, head of the National Social Insurance Agency (VSAA) Pension methodical management unit.
Last year was the first in a while when real wages fell. This directly affected the extent of indexation for pension beneficiaries with higher seniority, since so far, a larger index could be applied for higher seniority. This year, all pensions will be indexed equally, taking into account only the actual consumer price index.
“At the moment we are simply guided by the law in force, and no additional political decisions have been made here. I have presented in the budget priorities the possibility of gradually restoring the benefits for pensioners with seniority for every year of employment, which I think would be a fair reward for them, for those who have worked in contrast to those pensioners for whom we increased minimum income,” said the Welfare Minister Evika Siliņa (New Unity).
Swedbank chief economist in Latvia Līva Zorgenfreija said that the recipients of pensions are the part of society that is experiencing increases in overall price levels more, as prices increased most rapidly for food and utilities. However, the expected indexation is likely to be too small to offset the decline in purchasing power.
“Overall, it should be concluded that pension indexation is a little like a bandage on a corpse, because the increase is there, but it is not likely to cover the overall fall in purchasing power,” the economist said.
Zorgenfreija added that Latvia, compared to a large part of the European Union, has a less efficient social support system, so there are large inequalities in society.
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