State Participation in Funded Pension Systems in Selected Central and Eastern European Countries

CEE countries introduced funded pensions in the early 2000s. The stated objectives of funded pensions were to diversify old age pension income, to attract additional financing sources to pension systems, to assure adequate income for future retirees, and to balance future state obligations in aging societies. The state in CEE countries encouraged participation in funded pensions with the help of several incentives. The aim of this paper is to evaluate the costs and benefits for public finance of state participation in the funded schemes in Estonia, Latvia, and Lithuania. The results show that the fiscal costs of state participation do not exceed future benefits.