Pension changes spark referendum call

Trade unions are protesting against government proposals to bring forward the date when it plans to start raising the retirement age in Latvia. Unions had previously agreed to raise the age gradually from 2016, but this has now been brought forward to 2014. The government also wants people to have to pay into an insurance scheme for longer before being eligible for a pension. Unions have begun a letter-writing campaign and have warned that they may seek a referendum on the issue.

Background

Trade unions are focusing on the issue of pensions not only because it affects the social guarantees of workers but also because frequent changes in the pension system undermine confidence in the state’s social policy and social payments.

The current retirement age for both men and women in Latvia is 62. During the economic crisis, the government had repeatedly suggested raising the retirement age to 65, but its proposals were rejected.

At the beginning of 2012, when the government was starting to prepare its annual budget, it resumed discussions on raising the retirement age.

It prepared amendments to the law on state pensions which bring forward the beginning of a gradual rise in the retirement age by two years, starting in 2014. A start date of 2016 had been previously agreed with trade unions, and the new proposals would mean that a retirement age of 65 would be reached in 2020.

The amendments also proposed increasing the minimum insurance period necessary to qualify for a state old-age pension in 2014 from 10 to 15 years, and in 2020 to 20 years.

The government contends that a raised retirement age will make it possible to cut expenditure from the state’s social budget and thus avoid another potential crisis in the social budget.

Trade union objections

The trade unions had previously agreed to begin raising the retirement age in 2016 and therefore immediately objected to the government’s new plans. When the objections of the trade unions were disregarded in working group discussions, the Free Trade Union Confederation of Latvia (LBAS) began a letter-writing campaign.

It asked inhabitants to complete a sample letter on the LBAS website complaining about the new retirement plan, and to email it to Solvita Āboltiņa, Speaker of the Latvian parliament, the Saeima, or to send it to members of the Saeima.

On 16 April 2012, at an extraordinary board meeting of LBAS, amendments to the law on state pensions were discussed. LBAS maintained its position that raising the retirement age should start in 2016 and that it should proceed gradually, by three months per year, to reach a retirement age of 65 in 2028.

LBAS stated that it would start to prepare for a referendum if the Saeima ignores the previously agreed decision to begin raising the retirement age in 2016. Under Latvia’s constitution, just 10,000 signatures calling for a referendum have to be gathered before the Central Election Commission is obliged to launch a second signature campaign to discover whether one-tenth of the electorate supports a national ballot to decide an issue.

Social partners disagree

Social partners have had an opportunity to discuss this matter at the highest levels of government. Representatives from the Ministry of Welfare, which submitted the amendments, as well as representatives from the Ministry of Finance, the Ombudsman’s Office, Latvia’s Pensioners’ Federation, the Senior Citizens’ Association, the Latvian Employers’ Confederation (LDDK) and LBAS were invited to meetings of the Social and Employment Matters Committee.

The LDDK was the only social partner organisation that supported the amendments.

Yet despite all objections, on 19 April 2012 the majority of members of parliament (MPs) supported the new amendments that will increase the retirement age from 62 to 65 years, beginning in 2014 and ending in 2020, and for increases in the old-age pension qualifying insurance period. Workers will retain the right to request early retirement from up to two years before their official retirement age. The second reading of these amendments was scheduled for 7 May 2012.

Commentary

The ruling parties, consisting of the national party bloc and six independent MPs, voted in favour of the amendments. The opposition unanimously voted against them. The discussion before the vote was the first time in the history of Latvian social dialogue that national level social partners took a markedly conflicting position to the government.

Discussions about raising the retirement age will undoubtedly continue. Uncertainty about whether those who take early retirement will be able to find employment if they need to go back to work is the main reason for opposing the amendments. If early retirees cannot find a job, the gains from reduced pension payments could be cancelled out by the need to pay this group unemployment benefit and provide social services.

Doubts have been expressed about whether trade unions have the right to organise a referendum, because the constitution forbids referenda on matters that affect the state’s financial stability. However, trade unions have already organised one referendum on pension-related matters. Moreover, the referendum they are now proposing will be about the retirement age, not pension size.

Raita Karnite, EPC, Ltd

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