particular, what i have in mind is the need to increase transparency of the first pillar and to strengthen people ’ s confidence in it. these issues will become increasingly important in the future. they will have to be addressed – and the sooner, the better. thus, today, i suggest that we set our gaze slightly beyond the visible horizon. in other words, i propose that in today ’ s discussions, we consider the future of our pension system from the perspective of several decades rather than simply several years. let ’ s take a moment, however, to notice our starting position : the status quo of the lithuanian pension system and its envisaged developments. let ’ s briefly review the bank of lithuania ’ s assessment and several key proposals which might help us take further steps in the direction outlined by the reform. 1 / 4 bis central bankers'speeches colleagues, we face two major problems : poor benefits now and the prospect of even poorer pensions in the future. about the present. the average old - age pension is close to the poverty line. speaking about residents receiving only a sodra pension, the average replacement rate, that is, the ratio between pre - retirement labour income and pension, is only about 35 per cent, whereas the eu average comes close to 50 per cent. approximately one in four senior citizens in lithuania is exposed to the risk of poverty – according to the european commission, once again we are ranked in the bottom three of eu countries. we find ourselves in this – third lowest – position quite often, and we are even starting to come to terms with it. however, there is another important indicator – the ratio between pension expenditure per pensioner and gdp per capita. regrettably, this indicator ranks us in an even lower position. about the future. the international monetary fund estimates that, with no reform of the system undertaken, the average replacement rate for residents who do not independently save for retirement would further decrease and reach only 20 per cent over the coming decades. this means that, in the absence of change, in a couple of decades pensions – calculated at the present monetary value – will be almost one - quarter smaller than they are now. nowadays, there are a number of reasons for poor old - age benefits. one of them is a low level of redistribution through the state budget. last year, the amount of tax revenue in lithuania was below 30 per cent of gdp, while the eu average was almost 40 per cent. by comparison, had we collected the amount of tax

even if it seems like a distant prospect – every single person will have to have an account with a private entity just to make payments. unfortunately, this may lead to increased levels of financial exclusion. note that we still have vulnerable groups which, for one reason or another, are underbanked. therefore, amid the evolving payments market, one of the key motivations for the retail cbdc is to ensure people ’ s continued access to the central bank money. - - beyond payments, cbdcs could have important and, perhaps, desirable implications in other areas as well. some say that issuance of the interest - bearing retail cbdc could potentially improve the transmission of monetary policy – if indeed it is used widely. first, it may strengthen the passthrough of the policy rates to deposit and lending rates. second, the cbdc may alleviate the effective lower bound constraint, making it possible to go deeper into the negative territory. arguably, the retail cbdc could also have positive effects on financial stability. commercial bank money bears liquidity risks : for instance, the risk of commercial bank default. central bank money – by definition – is more secure than claims on any private financial institution. this holds true despite the existing deposit insurance schemes and no matter how sound the banking system is. even the finest financial supervisor will not beat the textbook truth. knowing this, the retail cbdc would further ensure that the funds stored in bank accounts can indeed be easily converted to risk - free central bank money. this could provide confidence in the 2 / 4 bis central bankers'speeches monetary system. - - dear colleagues, i am not sure if a digital coin has a reverse side. but a proper physical one certainly does. so let ’ s look at the other side of the coin – the underlying risks and uncertainties related to the cbdc. let me begin with the retail version of the currency. as a matter of fact, we could have introduced it a while ago, at least the account - based model. the technology to do so is available. however, this has not been done, and probably for a reason. the issue here is that central bank money being risk - free also means that the retail cbdc would be a safe asset. as such, it might essentially substitute for, let ’ s say, bank deposits. being more secure, and more convenient than cash, it could also be more attractive relative to a claim on a private bank. such a substitution effect could facilitate a flight towards