Pension accumulation scheme

PENSION ACCUMULATION SCHEME IN LITHUANIA

Pension accumulation scheme provides the opportunity to have additional income for future retirement 

The Lithuanian pension accumulation scheme became operational in 2004, allowing insured persons to accumulate a part of their social insurance contributions in private pension funds. The development and implementation of the system was prompted by demographic changes in society. The ageing of the population and increasing flows of emigrants will result in decreasing numbers of employed persons who pay social insurance contributions. Having regard to demographic changes in society, the Lithuanian pension accumulation scheme was developed and implemented to allow persons of retirement age to receive payments from several different sources and to ensure additional income they reach old age. Participation in the pension scheme is voluntary.  

Employed individuals who have not yet reached the statutory retirement age and who earn income subject to state social insurance contributions may become participants in the pension accumulation system with a chosen pension accumulation company. Currently, there are six pension accumulation companies operating in Lithuania. 

Pension contributions 

Pension contributions amount to pension funds is 3% of the participant’s income on which state social insurance contributions are calculated. In addition, the state pays an additional contribution for the participant from the state budget, which is an extra 1.5% pension contribution each month, calculated based on the national average monthly wage from two years prior. 

In 2026, the additional state pension contribution amounts to €33.49 per month. 

Participants of the pension accumulation scheme, as well as their employer, may make additional pension contributions of a chosen amount. 

For a participant in the pension accumulation scheme, during the period when they are one of the parents raising a child under the age of 3 and receiving a child care benefit, or when they are insured under the state pension social insurance at the expense of the state, a 1.5% pension contribution from the state budget is transferred to the pension fund. 

Suspension of pension contributions 

During the pension accumulation period, a participant may suspend pension contributions for 12 months. If needed, the suspension period can be extended an unlimited number of times. The participant must inform the pension accumulation company of their desired suspension or resumption of contributions (before the current period expires) by submitting a request. 

Option to withdraw 25% of the accumulated pension assets 

Once during the entire period of participation in the pension accumulation scheme, a participants may receive 25% of the pension assets accumulated in their name in the pension fund, but not exceeding the total amount of pension contributions paid by the participants themselves. 

If the amount of contributions paid in the participant’s name is less than 25% of the total accumulated pension assets, the participant will receive only the portion contributed by themselves. If the contributions paid in the participant’s name exceed 25% of the total accumulated pension assets, the participant will receive 25% of the accumulated pension assets. Additional contributions made by the participant or the employer are not included in this amount. 

To exercise the option to withdraw 25% of the accumulated assets, the participant must submit a request to the pension accumulation company. 

Important: A 3% deduction is applied when withdrawing 25% of the accumulated pension assets, which is transferred to the Pension Annuity Fund, but only if the participant exercises this right before reaching retirement age. After reaching retirement age, this deduction does not apply. 

End of Pension Accumulation 

Pension accumulation ends when a participant reaches the statutory retirement age (or is granted a social insurance early s old-age pension) and, under the pension benefit agreement, the full pension benefit is paid out to them. Pension accumulation also ends when the participant dies (all accumulated pension assets are inherited in accordance with the procedure established by law); when a court declares the accumulation agreement invalid; or when a participant who leaves to work for institutions of the European Union transfers their pension rights from Lithuania to the pension system of EU institutions. 

From 1 January 2026, additional options to end participation in pension accumulation come into force: 

• when participation in pension accumulation becomes extremely difficult or pointless* for the participant; 
• when the participant has 5 years or less remaining until reaching retirement age and the amount of accumulated pension assets is less than 50% of the minimum amount required to purchase a pension annuity**. 

*Possibility to end pension accumulation when it becomes extremely difficult or pointless 

Participants will be able to end their participation in pension accumulation (with the full amount of pension assets accumulated in their name being paid out and no deductions applied) if at least one of the following grounds exists: 

a) the participant has been issued a referral for palliative care health services; 

b) the participant suffers from a serious illness that makes participation in pension accumulation extremely difficult or pointless, and which is included in the list of diseases approved by the Minister of Health and the Minister of Social Security and Labour; 

c) the participant has been determined to have a loss of 70% or more ability to participate (until 31 December 2023 – work incapacity of 70% or more; until 30 June 2005 – Invalidity Group I). 

An application to end participation in pension accumulation on these grounds must be submitted by the participant to the pension accumulation company. 

Important. Pension assets paid out to participants upon ending pension accumulation on these grounds will not be assessed when granting cash social assistance under the Law of the Republic of Lithuania on Cash Social Assistance for Low-Income Residents, will also not be assessed when granting social services under the Law of the Republic of Lithuania on Social Services, and enforcement proceedings may not be carried out against these assets under the provisions of the Code of Civil Procedure of the Republic of Lithuania 

**Possibility to withdraw accumulated pension assets for a pre-retirement-age person 

Participants who have 5 years or less remaining until reaching retirement age will be able to end participation in pension accumulation and receive the pension assets accumulated in their name, provided that the total amount of accumulated pension assets is less than 50%* of the minimum amount required to purchase a pension annuity. 

* In 2026, this threshold amounts to EUR 8 392.50. 

An application to end participation in pension accumulation as a pre-retirement-age person must be submitted by the participant to the pension accumulation company. 

Important. When withdrawing accumulated pension assets as a pre-retirement-age person, a 3% deduction is applied, which is transferred to the Pension Annuity Fund. 

Pension Benefits 

Upon reaching the statutory retirement age (or if an early social insurance old-age pension has been granted), a participant in pension accumulation becomes entitled to receive pension benefits. The type of pension benefit to which the participants are entitled is determined based on the amount of pension assets accumulated in their name. 

Pension assets accumulated up to the minimum pension annuity threshold (In 2026, this threshold amounts to EUR 16 785) may be withdrawn freely by choosing the type of benefit, i.e. the participant may choose to receive the accumulated pension assets as a lump-sum payment, periodic payments, or to purchase a pension annuity. Pension assets accumulated above the maximum pension annuity threshold (In 2026, the maximum pension annuity threshold is EUR 83 926) may be withdrawn as a lump-sum pension payment or used to purchase a pension annuity for the entire accumulated amount. 

Annuity 

An annuity is a periodic pension benefit paid to a participant for the rest of their life. The general characteristics of a pension annuity are as follows: stable monthly income; the amount of payments cannot decrease due to the economic situation in the country or globally or due to conditions in financial markets, but may increase as a result of good investment performance; the benefits are tax-exempt; payments are received for the remainder of the participant’s life; and there is also a possibility to inherit part of the amount (depending on the chosen type of pension annuity). 

The minimum and maximum mandatory pension annuity thresholds for a given year are calculated based on the average old-age pension amount in the first quarter of the previous year (respectively 10% and 50% of that amount). 

In 2026, the minimum pension annuity purchase threshold is EUR 16 785. 

In 2026, the maximum pension annuity purchase threshold is EUR 83 926. 

Types of annuities 

Standard pension annuity – an annuity under which pension payments start immediately upon purchase and are paid to the individual for the rest of their life. A standard pension annuity is non-inheritable. There is also an option to choose a standard annuity with a guaranteed payment period (also known as an inheritable pension annuity) until the age of 85, under which the annuity provider undertakes to pay the annuity for life, with the possibility to inherit the amounts not paid out before the annuity recipient reaches the age of 85. 

Deferred pension annuity – an annuity purchased by a participant upon reaching retirement age, where annuity payments begin only upon reaching the age of 85 and continue until death. This means that from the ages of 65 to 84 (inclusive), the individual receives periodic payments from the pension fund (which are inheritable), and from the age of 85 receives deferred pension annuity payments from Sodra. Pension annuity payments made by Sodra are non-inheritable. 

Important. If a participant has exercised the option to withdraw 25% of the accumulated pension assets, a formula is applied when assessing whether the participant is required to purchase a pension annuity (i.e. whether the amount of accumulated pension assets reaches the minimum pension annuity purchase threshold). Under this formula, the withdrawn portion of pension assets is also taken into account when determining whether a pension annuity must be purchased; therefore, this obligation does not cease even if, after the withdrawal of 25% of the pension assets, the remaining accumulated assets have decreased and no longer reach the minimum annuity purchase threshold. 

Lump-Sum Benefit 

Lump-sum pension benefit – participants may withdraw it when the amount of accumulated pension assets is less than the minimum pension annuity purchase threshold set for the relevant year. In addition, when the amount of accumulated pension assets exceeds the maximum pension annuity purchase threshold set for the relevant year, the portion of pension assets exceeding the maximum threshold may also be withdrawn as a lump-sum benefit. Lump-sum pension benefits are paid by pension accumulation companies. Lump-sum pension benefits are not subject to additional taxation. This type of benefit is inheritable. 

Periodic Benefit 

Periodic pension benefit – participants whose accumulated pension assets are less than the minimum pension annuity purchase threshold set for the relevant year can choose to receive their accumulated pension assets in the form of periodic payments. Periodic pension benefits are paid by pension accumulation companies. This type of benefit is inheritable. 

Option to Withdraw from Pension Accumulation During the Transitional Period from 1 January 2026 to 31 December 2027 

During the period from 1 January 2026 to 31 December 2027, all pension accumulation participants who started participating in pension accumulation prior to31 December 2025 but have not yet concluded a pension benefit agreement will have the option to withdraw from pension accumulation regardless of their age or other conditions. 

Implementation of the withdrawal option during the transitional period 

What a participant will receive upon terminating pension accumulation in 2026–2027: 

1. The individuals will be able to withdraw their own contributions and the full investment return earned on those contributions; 
2. Pension contributions paid on behalf of the participant by Sodra and/or the state budget will be converted into additional pension points for the Sodra pension. These additionally acquired pension points will, in the future, increase the individual part of the person’s social insurance pension. 

To terminate participation in pension accumulation, participants must apply to their pension accumulation company and submit a request to terminate pension accumulation. Pension accumulation companies will review all requests by calendar quarters. Decisions will be made after the end of the quarter, and funds will be transferred to the account specified by the participant within 10 business days from the beginning of the following quarter (for example, requests submitted in January–March will be processed—decision taken and funds paid out—in April, within the first 10 business days; requests submitted in April–June will be processed in July, within the first 10 business days, and so on). 

Option to Terminate Periodic Pension Benefit Payments 

Individuals who concluded a periodic pension benefit agreement prior to 31 December 2025 have the right, from 1 January 2026 to 31 December 2027, to apply to their pension accumulation company and submit a  request for the payment of the remaining unpaid pension assets  as a lump-sum benefit. The lump-sum benefit must be paid no later than 10 business days after the last day of the calendar quarter in which the individual submitted the request to the pension accumulation company for the payment of the remaining unpaid pension assets as a lump sum. 

Option to Terminate a Pension Annuity Agreement When the Agreement Was Concluded Voluntarily 

Participants who, by 31 December 2025, voluntarily concluded a pension annuity agreement and whose accumulated pension assets were below the mandatory pension annuity purchase threshold have the right, from 1 January 2026 to 31 December 2027, to apply to Sodra and submit a request to terminate the pension annuity agreement. 

If a participant who purchased a deferred annuity terminates the pension annuity agreement, the pension accumulation company pays out the pension assets held in the participant’s pension account. If a participant who purchased a standard pension annuity or a standard pension annuity with a guaranteed period terminates the pension annuity agreement, the amount payable to them is calculated in accordance with the methodology approved by Sodra. 

The pension assets held in the pension account or the amount payable as calculated under the methodology approved by Sodra must be paid no later than 10 business days after the last day of the calendar quarter in which the individual submitted the request to the Fund Board to terminate the annuity agreement. 

The operation of pension funds and the payment of benefits is supervised by the Bank of Lithuania.