Economist Explains Why He Would Withdraw from the Lithuanian Second Pension Pillar: the Reason Is Simple

“In the “Žinių radijo” program “Verslo pozizija” economist and mathematician Prof. Rimantas Rudzkis shared his insights.

 

– What do you think is the health of the Lithuanian economy?

 

– I think that the year is really successful, especially in the context of other European Union countries. In 2025, the economy grew much faster than the average, export indicators are good. I mean that the export of services demonstrates very good dynamics, which more than compensates for the trade deficit in goods.

 

In the past few years, Lithuania’s total export, and perhaps even the entire economy, has been driven by very successful export of services. We are used to the growth of transport services, but in the past three years, the export of information technology and financial services has been growing very rapidly.

 

In addition, the export of construction services has been expanding successfully for many years. We are increasingly resembling a developed country in the European Union, where services make up the majority of GDP.

 

From the perspective of the population, salaries have been growing, although the growth has slowed down slightly compared to previous years. However, it was impressive – about seven to eight percent per year. This is much faster than prices have grown. So life is improving.

 

The high unemployment rate is still somewhat worrying. This is a very important factor for the country, and it is even slightly higher than the European Union average. According to the Department of Statistics, the unemployment rate is about 7 percent. This number includes people who are actively looking for work.

 

Demographic indicators look very bad. When assessing the total birth rate, according to preliminary data, it has approached unity. For comparison, in 2023 it reached 1.18, in 2024 – 1.11.

 

Demographic indicators look very bad. When assessing the total birth rate, according to preliminary data, it has approached unity. For comparison, in 2023 it reached 1.18, in 2024 – 1.11.

 

In order for the nation not to shrink, this indicator should reach 2.1. Of course, in this respect we are not much different from other developed countries – this problem exists everywhere.

 

However, the dynamics in Lithuania are particularly poor: we are falling to last place, and I do not hear from those in power about measures to improve this situation.

 

– In what ways could the demographic situation be improved?

 

– Achieving the desired indicator would be too ambitious. We will not achieve it with any solutions at lightning speed, because for this the worldview of the entire country must change. Even in the USA this indicator reaches only about 1.6.

 

If we managed to at least partially improve the current indicator, the need for migrants would not be so great. If the flows of migrants are moderate, in the long run one can expect their assimilation.

 

The biggest problems arise when the lack of population is compensated by large flows of migrants – then the problems we see today in Sweden or France arise.

 

The biggest problems arise when the lack of population is compensated by large flows of migrants – then the problems we see today in Sweden or France arise.

 

First of all, financial incentives would be needed. Of course, they alone are not enough – at the same time, it is necessary to create real conditions for raising children.

 

– Do you think we talk enough about social and demographic problems, or is the airwaves filled with political scandals?

 

– I do not see any deeper discussion about the situation, trends or threats in Lithuania, either among the presenters or among the political elite. True, the topic of military threats is constantly emphasized, but mainly because it is discussed throughout the European Union.

 

Meanwhile, specific problems of Lithuania are practically not discussed. Much more attention is paid to who said what, rather than to what decisions are needed, what are the development trends in Lithuania and what should be foreseen for at least a five-year period.

 

Of course, we may not be able to plan as far ahead as the Chinese are planning - the system and traditions are different there. However, we also need to get our act together and start to transform negative demographic trends. Paradoxically, Lithuania is unlikely to face any major problems in the next two or three years, and politicians live within this two or three-year horizon. This is where the problem lies.

 

One of the more radical decisions, which is unlikely to be adopted, could be a change in the electoral system.

 

One of the more radical decisions, which is unlikely to be adopted, could be a change in the electoral system. If we had the United Kingdom model, political power would be much more stable.

 

The electoral system there usually allows one party to win elections with a large margin, and coalitions are formed extremely rarely. Often, the same party wins other elections as well.

 

In this case, it becomes possible to plan in the longer term and at the same time it is more difficult to avoid responsibility. When one party is in power, it is directly responsible for the implementation of the Government's program. In Lithuania, for many years, three or four parties have been constantly competing for power.

 

– Why does Donald Trump need Greenland? What is his logic?

 

– During his first term, D. Trump spoke about his desire to take over Greenland, but no one took it seriously then. Europe is currently experiencing real anxiety. What arguments encourage D. Trump to make efforts to take over Greenland, even though this could cause serious shocks in relations with the European Union?

 

First of all, the geographical aspect. Greenland is much closer to the USA than to Europe. Secondly, the USA, in connection with global warming and the minerals on the Arctic shelf, has begun to pay great attention to the acquisition of this region.

 

Greenland in this case is an extremely tempting morsel. No one doubts that this was also discussed with V. Putin in Alaska – it is likely that these were informal backstage agreements on joint acquisition or sharing.

 

The third argument is the US military base there, which is why Greenland is important from a security point of view. In addition, it is a very suitable place for large data centers. Servers use a lot of energy and heat up a lot, so they require huge resources to cool them. For these reasons, Greenland is very attractive to the USA. I think that D. Trump will make every effort to take control of this island.

 

– The beginning of the year in Lithuania was marked by the repercussions of the second pension reform. What will be the final result of this reform?

 

– If an ordinary person were to ask me for advice, I would, of course, withdraw from the second pillar and stay only in “Sodra”. The reason is simple: as long as salaries and pensions are growing rapidly enough, and the ratio between the average salary and the average pension is one of the highest in the European Union and is still being sought to increase it, we can expect that in the next few years, or perhaps longer, pensions in Lithuania will grow faster than salaries. And these, in turn, will grow faster than salaries in the European Union.

 

This means that “Sodra” payments will grow faster every year than the profitability of pension funds. Pension funds are very low-risk and do not have the right to invest in risky securities, so they cannot objectively generate high returns.

 

– Isn't it true that people who retire will not have a decent pension?

 

– This is not entirely true. By participating in the second pension pillar, a person automatically reduces his or her Sodra pension. The final total amount may be lower than if he or she had remained only in Sodra, if the assumption is confirmed that the return on pension funds will be lower than the growth of Lithuanian pensions.

 

After all, it is not possible to participate in a pension fund and at the same time receive the entire Sodra pension - participation in the second pillar means giving up part of the Sodra pension.

 

If a person does not seek the maximum benefit, but wants to have as little risk as possible, it may be worth splitting it - after all, no one knows, maybe Lithuania will face a serious economic crisis after all, the economy will collapse, and pensions will no longer grow, but will start to decrease. Such a scenario is theoretically possible, but its probability is small.”

 

 

With the help of those in power, the second-pillar pension funds stole the Sodra pensions of the most vulnerable Lithuanians, our pensioners, current and future. When it became clear, there was no one to blame. No one is locked in prison, many are happy with houses by the lakes and the sea, including in Greece. Avoid Lithuanians working with others' money, and watch who you elect to the government of tiny Lithuania.

 

The criticism expressed here reflects the frequent dissatisfaction of Lithuanian society with the pension system model. Here are some essential aspects related to the aforementioned arguments about the relationship and responsibility of "Sodra" and pension funds:

 

"Sodra" vs. Pillar II growth: Historically, "Sodra" pensions have grown faster in recent years (due to the indexation mechanism linked to the increase in the wage fund) than the return of many pension funds, especially conservative ones. In 2026 according to the data, inflation and wage growth remain the main factors influencing this difference.

 

Investment risk: Pillar II funds in Lithuania operate on a “life cycle” principle. This means that the investment strategy for young people is riskier (more shares), and as retirement age approaches, funds are automatically transferred to low-risk (bond) funds.

 

However, low-risk funds often have difficulty outpacing inflation.

 

Legal regulation and liability: The debate on compulsory accumulation and the possibility of withdrawing from the system reached the Constitutional Court in 2024–2025. After its decision, more flexibility was introduced, but the fundamental reform that allows everyone to freely withdraw their accumulated money is still the subject of political disputes.

 

Transparency: The criticisms of "lakeside houses" and fund managers' earnings are related to the administration fees that each investor pays, regardless of whether the fund made a profit or suffered a loss.