Wide-ranging reforms to so-called ‘service pensions’ are planned in Latvia. These pensions are paid out early to people who work in professions which are either dangerous, or where their ability to work is heavily dependent on their age and health. The Ministry of Welfare wants to raise the age of eligibility by an average of eight years and exclude a number of professions. The Trade Union of Culture Workers, the Ministry of the Interior and police are all unhappy with the plans.
Background
The pension system in Latvia was reformed in 1994. At the time there were calls for the elimination of so-called service pensions, awarded to workers in dangerous occupations, or jobs where work performance depends heavily on age and health. These pensions can be claimed earlier than normal state pensions after a certain length of time in a profession. Despite efforts to get rid of them, service pensions still exist, and the number of categories of professional people eligible to receive them has increased.
Service pensions are regulated by the Law on State Pensions. Regulations from the Cabinet of Ministers are in place for people in the aviation sector, as well as rail, public road, sea and water transport workers. Also covered by these regulations are workers in creative professions, such as circus performers, opera singers and dancers.
There are six laws on service pensions for six categories of professions. They include rank and file employees and unit commanding personnel of the institutions of the Ministry of the Interior, prosecutors, judges, diplomats, and officials of the Corruption Prevention and Combating Bureau (KNAB). Some professions in art organisations run by the state and local government such as professional choirs, orchestras, dance troupes and circus organisations are also covered by the regulations.
Since 1 January 2011, service pensions have been administered by the State Social Insurance Agency (VSAA).
Ministry of Welfare’s plans
The Latvian Ministry of Welfare has prepared a proposal for reforming service pensions and the new regulations are expected to come into effect in 2016. They raise the age of eligibility by an average of eight years.
In the current system, a service pension may be requested in some professions between the ages of 38 and 45. The Ministry of Welfare is asking the Government of Latvia to raise the age of eligibility by six months every year, starting from 2016, until the age of 58 is reached. Military personnel and judges will be excluded from these new regulations. The minimum length of service would also be raised from the current 20 years to at least 25 years, and only work that qualified an employee for a service pension would be counted towards length of service.
The ministry wants to exclude people whose job description is incompatible with the aim of receiving a service pension. For instance, it wants to disqualify people in support roles, such as records management and book-keeping.
The ministry proposes that the amount of the service pension should be 55% of the average monthly salary earned during the last five years before the pension is applied for. Payment would be stopped if the recipient continued in a job that qualified them for a service pension.
Culture workers’ union raises concerns
The Latvian Cultural Workers’ Federation (LKDAF) says the proposal means workers in the culture sector would lose their right to service pensions.
At a meeting in February 2013 with representatives of the Ministry of Welfare, the social partners were unable to reach agreement. It led to the union calling for culture workers to hold a demonstration against the proposed service pension reforms.
People who work in areas associated with culture, such as actors, circus performers, ballet dancers and musicians, want the current system to remain unchanged. They say their salaries are unjustifiably low and their work is unique. They say ‘social guarantees’ are especially important if they are to carry on working in cultural organisations.
The Ministry of Welfare is trying to establish a dialogue with the LKDAF and with employers and employees in the culture sector. However, the ministry says it is not prepared to change its proposal. The ministry believes cultural workers should receive higher salaries or seek other employment if physical incapacity prevents them from continuing to work in the sector. The trade union says the ministry’s proposal worsens the situation of cultural workers without suggesting how to improve it. No proposal has been made to suggest how salaries might be raised by cultural organisations run by the state and local governments.
The Latvian Ministry of Culture supports the trade union’s viewpoint.
Top officials and police unhappy
Top officials in law enforcement institutions are also unhappy with the reforms. Eriks Kalnmeiers, Procurator General of the Republic of Latvia, says implementing the pension reform could cause a mass exodus from law enforcement institutions. He says between 70% and 90% of experienced state procurators could leave, and police were also likely to leave the ranks.
The prospect of receiving a service pension is one incentive that keeps people working in investigative agencies where low salaries prevail.
On 19 March 2013, Minister of the Interior Rihards Kozlovskis told the media, that because of uncertainty about further developments over service pensions reform, 112 employees had left their jobs in the police force over the past month. He said that for this reason the Ministry of the Interior also opposed the proposals by the Ministry of Welfare.
Commentary
Threats to service pensions in the sphere of culture and the police are of particular concern. Salaries in these sectors are already low despite the skills these jobs require, and the sometimes difficult working conditions.
It should also be stressed that the cost of service pensions in the cultural sector is insignificant. Only 178 people employed in the sector currently receive service pensions. The average monthly amount of these pensions in December 2011 was LVL 253 (€360 as at 26 April 2013). The figure is low, but it is enough to give people a sense of security in case they are unable to keep working because of their declining professional capabilities.
Raita Karnite, EPC, Ltd.