An Analysis of Latvian Private Pension Funds and Young People’s Attitudes Towards Them

In Latvia, demographic trends – population aging and low birth rates – necessitate a reassessment of the sustainability and efficiency of the pension system. The three-tier pension system, particularly its third voluntary tier, plays an increasingly important role in ensuring the future well-being of the population. Despite the offered tax incentives and the diversity of funds, public participation in the 3rd pension tier in Latvia remains limited, highlighting the need for a deeper analysis of this tier’s functioning and effectiveness. Public awareness and trust in pension funds are essential for building long-term savings and maintaining balanced social security. The aim of this paper is to analyze the operation of Latvian private pension funds, as well as young people’s perception and attitude towards them, and to provide recommendations for improving the effectiveness of the 3rd pension tier and increasing youth engagement in pension savings. To achieve this aim, the following tasks were set: to conduct an analysis of private pension funds; to examine the results of the Luminor Bank survey on public attitudes toward the 3rd pension tier; to analyze the results of a survey supervised by the authors among Latvian youth to identify their perception of private pension funds; and to identify the factors that encourage or hinder young people’s interest in pension savings. The paper’s methodology includes both primary data analysis (a survey supervised by the authors) and secondary data analysis, using literature review and comparative analysis methods, as well as the interpretation of statistical data based on the Financial and Capital Market Commission, the Bank of Latvia, the Finance Latvia Association, and other sources. The research results show that despite stable long-term fund returns, public participation remains low. The main limitations are low financial literacy, limited motivation for long-term savings, and a lack of information. To promote the development of the 3rd tier and increase youth involvement in pension savings, the following recommendations are proposed: improving financial education, reviewing tax relief mechanisms, creating special youth-oriented pension plans with flexible contribution options and lower management costs in the initial years, and encouraging the inclusion of migrant workers in social insurance, among others.