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

Author

Listed:
  • Federica Brenna

    (Bank of Lithuania)

  • Stefan Girstmair

    (Bank of Lithuania)

  • Kasparas Vasiliauskas

    (Bank of Lithuania)

Abstract

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.

Suggested Citation

  • Federica Brenna & Stefan Girstmair & Kasparas Vasiliauskas, 2026. "Indexation, Reserves, and Crisis Resilience: An Assessment of Lithuania’s Social Insurance Fund," Bank of Lithuania Occasional Paper Series 60, Bank of Lithuania.
    • Handle: RePEc:lie:opaper:60
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    Keywords

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    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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