A judgment in the case on amendments into the Law on State Funded Pensions has been adopted
The Constitutional Court has adopted a judgment in the case No. 2010-21-01 “On Compliance Section 4(2) and Para 2, Para 3(4) and (5) of the Transitional Provisions of the Law on State Funded Pensions with Article 1, Article 105 and Article 109 of the Satversme of the Republic of Latvia”.
The contested norms reduce the previous amount of instalments to be made into the State funded pension scheme.
The applicant holds that the contested norms breach, among the rest, the principle of legitimate expectations because no transitional period or compensation is provided for the reduction of the expected pension. In its reply, however, the Saeima drew attention to the threat to the social budget occurred in the result of economic crisis and the necessity to balance incomes and expenses of the social budget.
The Constitutional Court established that it is possible to reduce funding for the State funded pension scheme only in extraordinary cases, and such reduction must be of a short-term character. The Court also found that creation of the State funded pension scheme and the fundamental principles of its functioning have given persons the grounds to expect that the scheme would be implemented in a way to ensure accumulation of pension capital. The Court indicated that, under particularly difficult economic circumstances, social insurance instalments into the State funded pension schemes can be reduced only insofar as the scheme maintains its ability to ensure accumulation of pension capital. Successful functioning of funded pension scheme is closely related with trust of persons into pension scheme and their motivation to pay taxes. Consequently, the legislator has to establish such regulatory framework that would be aimed at sustainable development of the funded pension scheme.
The Court also recognized that the contested norms establish fewer restrictions to the pension system established in the result of economic crisis. The Court has taken into account the fact that the contested norms form a single regulatory framework, and they preserve the aim of establishing the funded pension scheme. The amount of instalments that was initially established as the minimum in order to maintain accumulation of resources (two percent) is now being transferred into the scheme. Moreover, the law establishes prospective increase of the instalments, namely, upon 1 January 2011 instalment rate into the funded pension scheme shall be no less than four percent. Consequently, the legislator has established procedure, according to which further functioning of the State funded pension scheme would be ensured.
Therefore the Constitutional Court recognized the contested norms taken as a single regulation as compliant with Article 1, Article 105 and Article 109 of the Satversme.
The judgment of the Constitutional Court is final and not subject to appeal. The judgment shall come into force upon the date of publishing it in the newspaper “Latvijas Vēstnesis”.
Linked case: 2010-21-01