Savings accumulated in private pension funds and funded pension plan grow in Latvia

Finances accumulated in state funded pension plan continue to increase in Latvia – the volume of accumulated finances has grown by EUR 102 million in Q2 2016. With that, the overall amount of money in pension funds has exceeded EUR 2.5 billion.

Of this amount, EUR 2.1 billion comes from deposits made by pension plan participants and EUR 397 million comes from guaranteed profits for 2nd pension system participants, according to a report from Latvian Commercial Banks Association.

The value of capital accumulated in private pension funds has grown EUR 8.5 million in Q2, reaching a total of EUR 340.3 million. This increase was secured thanks to pension plan participants’ payments (EUR 14.1 million) and guaranteed profits of EUR 2.7 million.

Considering major fluctuations on financial markets, pension plans that invest a relatively small amount in stock markets demonstrated better results in Q2 2016. Conservative plans of state funding pension plans secured 1.63% annual yield. Average yield of balanced and active plans was negative (-0.47% and -1.54%, respectively). Balanced plans of private pension funds provided participants yield of +1.10% at the beginning of the year (active private pension plans provided yield of -0.38%).

Deposits made to pension plans are a form of long-term investments. With that, their yield should be viewed in a long-term perspective. Average yield of state funded pension plans was 3.24% in the last four years and 3.42% in the last ten years. Similar yield was secured by private pension funds: five-year yield was 3.61% and ten-year yield was 3.49%.

Private pension fund yield in bonds has grown by three percentage points, in stocks – by one percentage point. The volume of money remaining on bank accounts has reduced by four percentage points.

42% of state funding pension plan assets and 31% of private pension plan assets are invested in Latvia. This helps maintain good geographical diversification of deposits.

There were seven asset managers that worked as part of state funded pension plans in Latvia in Q2 2016. Those pension plans offered participant a choice of 20 different pension plans. In total, there were more than 1,257,000 participants of those pension plans.

There are currently six private pension funds in Latvia (five open pension funds and one closed pension fund). They offer 15 different pension plans that differ in terms of money deposit strategy and yield indexes. Private pension funds have 262,000 participants.

BNN 

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