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

Federica Brenna, Stefan Girstmair and Kasparas Vasiliauskas
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Stefan Girstmair: Bank of Lithuania
Kasparas Vasiliauskas: Bank of Lithuania

No 60, Bank of Lithuania Occasional Paper Series from 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.

Keywords: pension reserves; pay-as-you-go; demographic ageing; replacement rate; crisis resilience (search for similar items in EconPapers)
JEL-codes: G11 H55 J11 J26 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2026-06-18
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