Vytautas Žukauskas. On the Pension Conflict

There is a saying that “great neighbors require great fences”. It means that in order to avoid conflict, we need to know what belongs to whom, and who is responsible for what. If the boundaries are not clear, there is sure to be a conflict.

This principle is also valid when talking about society and its inner relationships. One of the conflicts that arises from an unclear assignment of resources and responsibilities is now racing between the pensioners and the working class (future pensioners). The governmental pension system and government’s lack of ability to draw clear boundaries between what belongs to whom has now created a false tension in the society.

Recently, a group of pensioners went on a protest where they demanded higher pensions. The publicly released resolution also demanded that tax transitions to second pillar private pension funds from state and public social insurance budgets be phased out at once. It also called for a 60 EUR one-off compensation for the misappropriated pensions paid out to second pillar pension funds.

We can understand the pensioners; the pensions in Lithuania are not very high. They feel like the working class people transferring their social insurance taxes to second pillar pension funds are somehow a threat to their own pensions. As if that is the reason why their pensions are smaller than they would be otherwise. After all, the money of the working class (which pays for their pensions) ultimately ends up in personal accounts rather than the social insurance budget.

However, the perspective of the working class is a lot different. By saving money, they take care of their own future! Up until now, more than a million citizens opted to get smaller governmental pensions by transferring part of the taxes payed for social insurance to the second pillar pension funds. 425 thousand of these people agreed to pay an extra 2% from their monthly salary in order to save more and consequently have an alternative financial source in the future. They find it smart and reasonable, as the ageing population in Lithuania make for a vague future in terms of governmental pensions.

Thus the pensioners’ wish to stop the working population from taking care of their own future, and on top of that force them to pay for compensations that seems like a slap in the face. The working class already give away more than 40% of their salary in taxes. A big part of these taxes is dedicated to the care of pensioners. Shouldn’t we be able to save a few percent of their income to secure our future?

Here is where the paradox of the governmental pension fund system reveals itself. The system is based on the idea that a person is not capable of saving for one’s pension; therefore, the government does it for them. By doing so, the government puts all its citizens in a system, where their personal initiative to save for their future puts the system itself in danger. Such a system is not a desirable one, to say the least.

Moreover, the government is persistent in reminding us that we have to show solidarity in helping one another and that allegedly the social insurance system reflects that “solidarity”. In addition, through such a system we take care of those in need, including ourselves. However, forced solidarity creates a contradiction – the working class taking care of themselves seems to oppose the interests of the pensioners, while helping the pensioners more would result in a burden on the workers. The pursuit of solidarity becomes a conflict of interests.

So, who are right, and who are wrong – the pensioners or the working class? The problem lies in the fact that in this system of governmental pensions, everyone is both right and wrong. This is due to a lack of boundaries – it is not clear what belongs to whom and who is responsible for what. This is not just another incidental consequence of the governmental pension fund system. As soon as the government decides that 40% of one’s money belongs to everyone, the conflict is sure to arise. The budget will always be tight; while there will always be more than enough people to claim it.