LIETUVOS RESPUBLIKOS

LIETUVOS RESPUBLIKOS REPUBLIC OF LITHUANIA LAW ON REFORM of the PENSION SYSTEM 3 December 2002 No IX-1215 (As last amended on 30 June 2010 – No XI-954) Vilnius Article

1. Purpose of the Law This Law has the purpose of establishing the legal basis for as well as basic principles of the accumulation of a portion of the state social insurance contribution, which ensures the additional income of residents of the Republic of Lithuania during their retirement. Article
2. Definitions
3. “Pension annuity” (hereinafter referred to as “annuity”) shall mean a pension benefit paid to the participant on a periodical basis for his lifetime, the full risk of payment whereof shall be borne by the payer of the benefits – a life insurance undertaking.
4. “Participant” shall mean a person who has, under this Law, chosen to accumulate the pension contribution in a pension accumulation company and has concluded a pension accumulation agreement with this pension accumulation company, where the agreement is registered with the Republic of Lithuania Register of Pension Accumulation Agreements managed by the State Social Insurance Fund (hereinafter referred to as the “Register of Pension Accumulation Agreements”).
5. “Life assurance undertaking” shall mean an undertaking established and operating in accordance with the procedure laid down by the Law on Companies and the Law on Insurance.
6. “Diversified investment portfolio” shall mean an investment portfolio meeting the requirements set forth by laws.
7. “Cumulative pension contribution” (hereinafter referred to as “a pension contribution”) shall mean a portion of the state social pension insurance contribution as specified by this Law and accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him.
8. “Pension fund” shall be interpreted as defined in the Republic of Lithuania Law on the Accumulation of Pensions.
9. “Pension accumulation company” shall mean a management company of pension funds or a life insurance undertaking holding an authorisation or licence issued by the supervisory institution to engage in the accumulation of pensions in the territory of the Republic of Lithuania as specified under this Law.
10. “Pension accumulation agreement” shall mean an agreement concluded, in accordance with the procedure laid down by laws, for a period of the accumulation of pension contributions between a person covered by state social insurance and a pension accumulation company on the accumulation of pension contributions in the person’s pension account opened in this company.
11. ”Pension accumulation activities” shall mean the financial and economic activities of pension accumulation companies the purpose whereof is to accumulate for retirement additional income of participants by collecting the participants’ contributions as specified by this Law, investing or reinvesting them in a diversified investment portfolio as well as paying pension benefits to the participants under the terms and conditions laid down by laws.
12. “Pension account” shall mean a personal account of a participant opened in a pension accumulation company in accordance with the established procedure whereto the units of account due to him are entered on behalf of the participant.
13. “Pension assets” shall mean the amount of the assets acquired in exchange for pension contributions (including the temporarily uninvested proportion of these funds) as well as investment income (costs) received from these assets (funds).
14. “Pension fund management company” (hereinafter referred to as “a management company”) shall be interpreted as defined in the Republic of Lithuania Law on the Accumulation of Pensions.
15. “Accumulation of a portion of the state social insurance contribution” (hereinafter referred to as “accumulation of pensions”) shall mean a system of the means established by the State which entitles residents of the Republic of Lithuania covered by state social insurance to accumulate a portion of the state social pension insurance contribution as specified by this Law in a pension accumulation company by investing or reinvesting it in a diversified investment portfolio as well as to receive pension benefits under the conditions laid down by laws. Article
16. Participation in the Accumulation of Pensions
17. The persons receiving the insured income on which compulsory state social pension insurance contributions are payable to receive the basic and supplementary part of a pension, also the persons who, under the Law of the Republic of Lithuania on Preservation and Transfer of the Pension Rights of Officials of the Institutions of the European Communities and of Members of the European Parliament, have chosen to transfer their rights to the State Social Insurance Fund and a pension fund operating under the Law of the Republic of Lithuania on the Accumulation of Pensions, with the exception of the persons who have attained the pensionable age, shall have the right at their own choice to become participants of a pension fund and to accumulate the pension contribution specified by this Law in pension accumulation companies. In respect of the persons who have chosen to participate in the accumulation of pensions, further participation may not be terminated, except for the cases specified by the Law on the Accumulation of Pensions.
18. The persons specified in paragraph 1 of this Article shall have the right, where they have not concluded a pension accumulation agreement with pension accumulation companies, to conclude these agreements until 1 December 2003, and during the other calendar years – from 1 January until 1 July, with the exception of the persons who have newly entered the labour market and have received a social insurance certificate for the first time, who shall have the right to conclude these agreements until 1 October. Such a pension accumulation agreement shall enter into force and pension contributions shall be counted from 1 January of the next year, where the pension accumulation agreement was registered, in accordance with the procedure laid down by regulatory enactments, in the Register of Pension Accumulation Agreements. The persons entitled to transfer of pension rights from the pension system of EU institutions under the Law of the Republic of Lithuania on Preservation and Transfer of the Pension Rights of Officials of the Institutions of the European Communities and of Members of the European Parliament shall not be subject to the time limits for concluding pension accumulation agreements referred to in this paragraph. A pension accumulation agreement concluded by these persons shall enter into force on its registration with the Register of Pension Accumulation Agreements.
19. Participants shall have the right to freely choose a pension accumulation company. A participant may at the same time have a pension account in which the pension contribution as specified by this Law is being accumulated only in one pension accumulation company. Where a participant transfers to another pension accumulation company, his pension account in the former pension accumulation company shall be closed, and the funds accumulated therein shall be transferred to a pension account opened in another company.
20. Participants shall have the right to transfer, in accordance with the procedure laid down by laws, to another pension accumulation company, with the exception of the first three years after the entry into force of the first pension accumulation agreement. The procedure for covering the administration costs related to the transfer to another company shall be regulated by the Law on the Accumulation of Pensions. A pension accumulation agreement may not be terminated until an agreement with another pension accumulation company has been concluded, except for the cases specified by laws. Transfer shall not be restricted in the event of reorganisation, bankruptcy and winding up of a pension accumulation company. Article
21. Pension Contribution
22. The amount of the pension contribution in 2004 shall be 2.5 percent, in 2005 – 3.5 percent, in 2006 – 4.5 percent, in 2007 and 2008 – 5.5 percent, from 1 January 2009 until 30 June 2009 – 3 percent, and from 1 July 2009 – 2 percent of the income of participants on which state social insurance contributions are payable.
23. The general rate of the state social insurance contribution shall not be increased by the amount of the pension contribution as specified by this Article.
24. The amount of a pension contribution in respect of the income of the persons who received income from sports activities, the persons who received income from performing activities and the persons who received income under commission agreements as well as self-employed persons, as they are defined by the Law of the Republic of Lithuania on State Social Insurance, where compulsory state pension social insurance contributions at a reduced rate were payable in 2009 and 2010 on such income in accordance with the procedure laid down by the Law of the Republic of Lithuania on State Social Insurance Law, shall be 1 percent in 2009 and 2 percent in
26. Pension contributions for the persons covered by insurance from funds of the State budget shall not be calculated and paid. Article
27. Cumulative Pension Benefits
28. The participants who have attained the pensionable age as specified by the Law on State Social Insurance Pensions shall be entitled to receive a pension benefit from pension accumulation companies.
29. The pension benefits as paid from the pension assets accumulated by a person may be a pension benefit paid on a periodical basis, annuity or a lump sum pension benefit. The conditions for the payment of these benefits shall be laid down by laws. Annuities shall be paid by life insurance companies from the pension assets accumulated by a person.
30. Where a participant dies during the accumulation of pension contributions, the funds accumulated in the personal pension account shall be inherited in accordance with the procedure laid down by the Civil Code. Article
31. Ratio of State Social Insurance and Cumulative Pension Benefits
32. The amount of state social insurance old-age pensions shall, in accordance with the procedure laid down by the Law on State Social Insurance Pensions, be reduced proportionately for participants taking account of a proportion of the state social insurance contribution allocated for the accumulation of pensions. The amount of a person’s state social insurance old-age pension shall not be reduced for a period during which he was not a participant in the accumulation of pensions.
33. In respect of the persons who have not participated in the accumulation of pensions, the amount of state social insurance old-age pensions as well as awarded state social insurance old-age pensions shall not be reduced. Article
34. Administration and Supervision of the System of Pension Accumulation
35. State social insurance contributions a constituent part whereof is the pension contribution shall be calculated and transferred by policyholders to the budget of the State Social Insurance Fund in accordance with the procedure established by laws.
36. Records of participants shall be managed and pension contributions shall be transferred to the pension accumulation companies as chosen by the participants by the administration agencies of the State Social Insurance Fund in accordance with the procedure laid down by the Government. The pension accumulation companies must, in accordance with the procedure laid down by laws, notify the administration agencies of the State Social Insurance Fund of the pension accumulation agreements concluded and terminated.
37. The state supervision of the pension accumulation activities of management companies shall be exercised by the Securities Commission. The state supervision of the pension accumulation activities of life insurance undertakings shall, in accordance with the procedure laid down by laws, be exercised by an institution exercising the supervision of insurance activities under the Law on Insurance (hereinafter referred to as the insurance supervisory institution).
38. The structure of and restrictions on deductions from pension assets for the benefit of a pension accumulation company shall be specified by laws.
39. The institutions exercising supervision of the activities of pension accumulation companies must, in accordance with the procedure laid down by laws, submit to the Ministry of Social Security and Labour information about pension accumulation activities.
40. When exercising supervision of pension accumulation companies, the institutions specified in this Article must exchange the information available to them in accordance with the procedure laid down by the Government. Article
41. Measures Ensuring Safety of the Activities of Pension Accumulation Companies
42. The financial activities of a pension accumulation company must be annually verified by an audit firm.
43. Pension accumulation companies must submit respectively to the Securities Commission or insurance supervisory institution and publish their activity and financial position reports in accordance with the procedure laid down by these institutions.
44. A pension accumulation company must, at least once per calendar year, notify each participant of the amount of pension assets in his personal pension account. The company must enable the participant, at his request, to obtain information about the condition of his pension accumulation account, the investment strategy of funds and the investment return received under the strategy as well as an auditor’s report about the financial activities of the company.
45. In the event of winding up by reason of bankruptcy of a pension accumulation company, other creditors of the company (non-participants) shall not have the right to levy execution against pension assets.
46. A pension accumulation company must have custody of the monetary funds and securities forming pension assets in accordance with the procedure laid down by laws.
47. Pension assets may be invested only in compliance with the diversification requirements set forth by laws as well as investment restrictions having the purpose of reducing the risk of investments and ensuring their liquidity.
48. A pension accumulation company, which shall guarantee participants a certain rate of profitability, must establish technical provisions or form a guarantee reserve to secure these obligations in accordance with the procedure laid down by the Law on the Accumulation of Pensions. Article
49. Financing of Shortage of Funds of the Budget of the State Social Insurance Fund Shortage of funds of the budget of the State Social Insurance Fund arising due to the implementation of this Law may be financed in accordance with the procedure laid down by the Law on the Privatisation of State-Owned and Municipal Property from the funds obtained upon selling state property as well as from the state budget and other sources of financing. These appropriations shall be allocated to the State Social Insurance Fund annually when approving the budget of the State Social Insurance Fund and the state budget. Article
50. Final Provisions
51. This Law shall enter into force on 1 January
53. Pension contributions shall be calculated and transferred to the pension accumulation companies as chosen by participants from 1 January
55. The Government shall, until 1 May 2003, draft and submit to the Seimas amendments of the laws related to this Law as well as a law regulating the accumulation of a proportion of the state social insurance contribution. I promulgate this Law passed by the Seimas of the Republic of Lithuania. PRESIDENT OF THE REPUBLIC VALDAS ADAMKUS