Early Withdrawal of Third Pillar Pensions Threatens Long-Term Savings
Experts warn that allowing early access to third pillar pension savings could undermine financial security in retirement and increase the burden on the state budget.
Debates about allowing early withdrawal of third pillar pension savings may seem attractive in the short term, but in the long run they could weaken a key tool that helps Latvian residents secure higher income in retirement. Currently, only about a third of economically active individuals participate in the third pillar, and many start saving relatively late.
The average old-age pension in Latvia is less than €625 per month, yet over half (55%) of the population believes that at least €1,500 per month is needed for a decent retirement. The first and second pillars can only replace 40-50% of pre-retirement income, making the third pillar increasingly important.
Third pillar participants currently receive personal income tax refunds – for example, contributing €600 per year yields a €153 refund. If early withdrawal were allowed, these tax incentives might be reconsidered as they would lose their purpose of promoting long-term savings.
Moreover, third pillar savings grow through compound interest. For instance, saving €50 per month for 25 years can accumulate up to €40,000, while for 10 years only about €8,500. Early withdrawal at a younger age could reduce potential returns several times over.
Total third pillar assets have already exceeded €1.1 billion, and this growth has allowed management fees to decrease. Changes to withdrawal rules could also pose risks to the state budget, as the future burden of social security would increase.
The survey, involving over 1,000 Latvian residents aged 18-74, was conducted in January 2026 by CBL Asset Management in cooperation with research agency Norstat.
