In the paper, the philosophical and historical evolution of social transfers and their role in Latvia's social security system have been investigated. Definitions of social transfers have been studied, and a classification of social transfers has been made. The most suitable social security system, which, to a great extent, depends on social policies and a socio-economic situation in a country, is elaborated in every country. Latvia's social security system includes state social insurance, state social benefits, social services, and social assistance that are based on financing from both the state basic budget and the state special budget, and municipal budgets. Social transfers have a significant role in the social security system in order to provide protection for the population in social risk situations; they impact the welfare of the population during this period.

Private pension plans envisage a voluntary choice of a person to make additional savings for the retirement by joining a private pension plan and making contributions. In 2023, six open private pension funds offered twenty pension plans. Private pension funds provide three types of investment strategies: conservative, balanced and active ones. The research aim is to assess the performance of the private pension plans in Latvia. The research is based on the analysis of the statistical data on the return of assets and other performance indicators of private pension plans as well as it employs the correlation and regression analyses. The data analysis shows a steady increase (annually 6.24% on average) in the population participation in private pension plans. Active plan participants account for 51.42% on average, while the proportion of deferred participants is also large, i.e. 30.40% on average. Short-term returns of private pension plans are very fluctuating with expressive increases and decreases where the active pension plans demonstrated the most unstable return trends. The sharpest return decline was observed in 2022, when the arithmetic total average return of all private pension plans was – 14.63%. The basic reasons mentioned are the changes in investment portfolio, global downturn of stock markets and sharp growth of inflation. Long-term returns show a positive growth through the entire period analysed, i.e. 4.16% on average. This means that a short-term decline of returns does not signal of future decrease in the amount of pension, since contributions to pension plans are considered to be a long-term investment.

The Baltic States have a three-tier pension system. Pillar II is the state funded pension scheme in which contributions are made automatically from an employee’s gross salary as part of social contributions. The contributions to Pillar II state funded pension schemes may be invested in several pension plans with different risk ratios of which three types are the most common: active, balanced and conservative ones. The accumulation of funds and consequently a partial amount of an old-age pension depends on the chosen pension plan and the manager of funds. The research aim is to assess the operation efficiency of the state funded pension schemes in the Baltic States. The research mainly employs and provides the analysis on the statistical data on the value and return of assets and number of Pillar II scheme participants. Theoretical discussion is built upon the use of scientific publications by means of monographic descriptive method, correlation and regression analyses as well as the methods of analysis and synthesis. In Latvia, 25.62% on average of all state funded pension plans participants have chosen conservative strategy, while only 8.36% on average have chosen this strategy in Lithuania. In Estonia (75.49%) and Lithuania (69.13%), the majority of assets are accumulated in the balanced strategy pension plans. The research results show that pension plans have positive return in long-term; though, sharp fluctuations and negative return might be demonstrated in short-term. Both in Lithuania and Latvia exists a negative correlation between Pillar II pension schemes and inflation, i.e. the return of a pension scheme decreases with the increase of inflation meaning that inflation alongside with other economic and political factors might be considered as a factor affecting the return of pension schemes.