The survey* conducted by Nordea in Latvia on the attitude of residents towards the formation of savings for pension and the importance of socially responsible investments disclose increasing understanding of the population on the necessity to form savings, at the same time considering the overall welfare of the society. Currently the majority of investments are performed by residents in the age group from 45 to 54, with higher education and monthly income above 500 EUR for one member of the family.
Survey: Awareness of the population on investments and pension capital
91,6% of respondents with the average monthly income of 500 EUR or more for one member of the family admitted that they were aware where to find information on the balance of their 2nd Pillar Pension capital. Moreover, 36% of respondents have investments in the 3rd Pillar Pension.
When choosing the products of investment instruments, 64% of respondents admit that the factor of social responsibility is generally important. 35% of respondents know well, 49% have an approximate notion, but 13% have no idea, what a socially responsible company and socially responsible investments mean.
Only 26% of respondents would be ready to invest their money in the company, which is producing or selling weapons, in order to earn big profit, however 67% in total would not be ready to invest money in such company, but 7% of respondents do not have their opinion in this matter at all.
30% of the respondents like to choose and change the investment products themselves, but 27% like to independently follow the situation in the financial markets.
When choosing where to invest the most important features are the safety and reputation of the financial institution or service provider, but the second most important factor is the expected profit. Other factors were evaluated as less important.
Nordea study: the low profitability of the pension savings is just a myth
“We are very glad that the population is aware where they can find the information on the balance of their 2nd Pillar Pension account. It is important not only to regularly follow the growth of your capital, but also to pay enough attention to the profitability of the selected plan. Unfortunately, rather often there are made public conclusions that the average inflation exceeds the profitability thus systematically eliminating the pension savings. If you go into calculations just a bit deeper, the picture is quite different, which reminds of the old but good joke - if you have not had any dinner at all, but your neighbour has eaten a whole chicken, then “on average” you both have eaten well. The total profit of the 2nd Pillar Pension is 492 million euro, from which 212 million euro is profit, deducting the negative influence of inflation,” says Ilja Arefjevs, Member of the Board of Nordea Pensions Latvia.
“Moreover, comparing the former performance of 2nd Pillar Pension plan with the indexes of the most popular stocks and bonds in the world, we have to conclude that the index strategy demonstrates excellent results with the commissions of 0.3% per year. Currently no investment management company in Latvia is ready to offer index pension plans at such low commission fees. We expect that already in the coming years the deductions for the traditionally managed plans will be 0.4-0.6% per year with or without a possibility to apply the progress commission fee. In this situation our customers will undoubtedly benefit, because in long term this will increase the profitability of the 2nd Pillar Pension.
Finally, the profitability indices of the 2nd Pillar Pension in the Baltic States are rather similar within the comparable investment strategies - conservative plans have been a bit more profitable in Latvia, while in Lithuania those were the balanced plans. However there are no dramatic differences between them", emphasizes Ilja Arefjevs.
* The online survey was organized by marketing and public research centre SKDS, applying WEB AdHoch method. This survey was conducted in August 2017 in Latvia, where 700 respondents with an average monthly income of 500 EUR for one member of the family participated.
More information:
Edgars Zilde, Communications Project Manager at Nordea bank, tel.: 6 700 5434, cell.: 28 452 975, edgars.zilde@nordea.com