Seimas approved reforms of the second-pillar pension scheme

Press release, 26 June 2025 (News ● Photos ● Broadcasts and videos)

The Seimas agreed to reform the second-pillar pension scheme from 2026, adopting amendments to the Law on the Accumulation of Pensions.

Following the approved reforms, the second-pillar pension scheme will become more attractive and flexible. It will ensure voluntary membership, fulfil the ruling of the Constitutional Court, and will introduce the possibility to withdraw from the second-pillar pension accumulation when the accumulation becomes overly burdensome or pointless.

The amendments to the Law on the Accumulation of Pensions (draft No XVP-374(3)) were passed by 88 votes in favour, with 16 votes against and 5 abstentions.

Automatic enrolment discontinued

The Seimas decided to discontinue automatic enrolment of residents into the second-pillar pension scheme.  The reforms has introduced a voluntary accumulation model, replacing automatic enrolment every three years with ongoing invitations to join voluntarily, as well as public information campaigns about the opportunities available under the second-pillar pension scheme.

The Lithuania’s State Social Insurance Fund Board (Sodra) will send via the electronic services platform to individuals under the age of 40 annual reminders about the option to join the scheme.

Transitional period for those wishing to withdraw from the scheme

Under the adopted reforms, individuals who are dissatisfied with the updated conditions of the pension accumulation will be given the opportunity to withdraw from it.  Members will be able to reclaim their contributions and any investment returns made with their own funds. Meanwhile, contributions made on their behalf by Sodra or the state budget will be converted into additional pension accounting units in the Sodra pension system. 

The Seimas also agreed on a longer transitional period. Residents will have the option to withdraw from the pension accumulation between 1 January 2026 and 31 December 2027. The Government proposed a transitional period ending on 30 September 2027.

Additional options for continued members

Individuals who choose to remain in the second-pillar pension scheme will have greater flexibility, including the ability to select their preferred contribution rate and, if necessary, to suspend contributions. They will be able to opt for the standard 3% contribution, increase it or suspend payments if their financial situation worsens. Contributions may be paused for up to one year, with the option to extend this period.  There will be no limit on the number of times contributions may be suspended. 

Members will also continue to receive the Government’s incentive contribution of 1.5% of the national average gross earnings of the year before last.

More flexible access to accumulated pension funds 

The new provisions agree to allow an once-in-a-lifetime withdrawal of 25% of the accumulated funds (up to a maximum of the amount contributed by the resident himself) by the retirement pension age (subject to a fixed withdrawal deduction of 3% of the amount withdrawn). In addition, members who have saved up to half the amount required for a mandatory annuity will be allowed to withdraw their entire balance within five years of retirement or less. The 3% deduction on withdrawals of 25% will not apply if this right is exercised by an individual who has reached retirement age.

Without incurring personal income tax (PIT) or other taxes, it will be permitted to cease accumulating funds and withdraw all accumulated funds in the event that accumulation becomes overly burdensome or pointless in cases of: loss of 70-100% participation; diagnosis of a serious illness included in the list of diseases as defined by the Minister of Health and the Minister of Social Security and Labour; or identification of palliative care needs. In such cases, payment will be made within 30 days.

The pension annuity provider will determine the amount of pension assets accumulated in the pension fund each calendar year. This amount will determine the type of pension benefit to be paid to the member (i.e. the pension annuity limit). The formula for calculating this amount is laid down in the Law.

Preliminary estimates suggest that, by 2026, the threshold for the compulsory purchase of a pension annuity could be around €14,861. Meanwhile, the threshold for the compulsory purchase of an annuity from accumulated pension assets exceeding the defined amount could be around €74,307 in the form of a lump-sum payment. 

Members who have entered into a periodic pension benefit contract by 31 December 2025 will have the right to apply to the pension fund company for a lump-sum payment of their remaining unpaid pension assets until the end of 2027, after this Law comes into force.

Members who voluntarily concluded a pension annuity contract before 31 December 2025, at a time when their accumulated pension assets were lower than the compulsory pension annuity purchase amount set out in the Accumulation of Pensions, will be entitled to apply to the Lithuania’s State Social Insurance Fund Board for termination of the contract by the end of 2027.

Rimas Rudaitis, Adviser, Press Office, Information and Communication Department, 

tel. +370 5 209 6132, e-mail: [email protected]