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Abstract
Lithuania, like other Central European countries, undergoes a deep reform of the old age security system. The reform takes place in a controversial cognitive environment. The controversy is between methodological individualism and methodological holism as peculiar worldviews. The two world outlooks provide different reform perceptions and scenarios.
Highlights
Ottovon Bismarck's initiative to begin with public pension system was the beginning of what is today called welfare state
The viability of the new, mixed pension system depends substantially on the ability of the national budget to compensate "Sodra" for loss caused by redirection of part of social security contributions to individual accounts of the private pension funds
Most of disagreements come from the gnoseological, paradigmatic differences
Summary
Ottovon Bismarck's initiative to begin with public pension system was the beginning of what is today called welfare state. All this means that in practice a purely private pension system cannot exist, that the reality of old age protection (security) is mixedprivate and public economy It is the case even for Chile, often presented as a country with a fully privatised pension system. With increasing strength the interest groups, business and media, with a subtle but tangible support of the World Bank, advocated for the compulsory privatisation of 20% of old age security contributions and their redistribution in favour of private pension funds_ Lithuania had to follow Poland and Hungary in their pension system reforms. Sometimes in heated political debates "Sodra" is even called a financial pyramid Addressing this issue, we should compare the principal scheme of "Sodra" and the reformed pension system which combines both public pay-as-you-go and private fully funded elements. J They name 10 myths which are as follows: 1. individual accounts raise national savings; 2. rates of return are higher under individual aceounl~; 3. declining rates of return on pay-as-you-go systems reflect their fundamental weakness; 4. investment of public trust funds in equities has no macroeconomic effects; 5. labour market incentives are better under individual accounts; 6. defined benefit plans necessarily provide more of incentive for early retirement; 7. under individual accounts market competition ensures lower administrative costs; 8. individual account system is better than a corrupt public system; 9. bailout practice is worse under public defined benefit plans; 10. investmcnt made by publie funds is usually squandered and mismanagcd. (5, p. 2)
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