Policy

Indexation, Reserves, and Crisis Resilience: An Assessment of Lithuania’s Social Insurance Fund

Occasional Paper Series, No. 60/2026, Bank of Lithuania

This paper assesses reserves of Lithuania’s social insurance fund (Sodra) under demographic ageing and macroeconomic stress, projecting the budget through 2050 under two pension indexation rules: the current law and a seven-year average rule that allows for reserves to be used for pension expenses. The choice between the rules produces a sharp trade-off between reserve accumulation and pension adequacy. Within the seven-year average baseline, investment and fiscal instruments can ease the demographic pressure but cannot resolve it. Under a Global Financial Crisis-style shock, the indexation rule determines the distribution of crisis costs: reserves absorb the shock under one rule, pensioners under the other.

Can be downloaded here.

An Ex-Ante Assessment of the Proposal to Reform the Second Pillar of the Lithuanian Pension System

Occasional Paper Series, No. 57/2025, Bank of Lithuania

This document offers an ex-ante assessment of the proposal to allow the withdrawal of funds from the second pillar of the Lithuanian pension system. First, we use a quantitative macroeconomic model to quantify, under alternative scenarios, the potential impact that the withdrawal of Pillar II funds might have on the economy in the medium term. Second, we offer a long-term view of the current pension replacement rates and the consequences that the withdrawal of funds might have for those individuals who decide to opt-out of Pillar II.

Can be downloaded here.