45 and more

You have acquired several important skills in life.

If you are already saving in the 2^nd and 3^rd pension pillars, you are on the right track. In this case, your funds are invested in the financial markets and they can give you extra profit in the long run.

Make sure that the pension investment strategies you have chosen are right for you. Check your 2^nd pillar pension plan here. Information about the 3^rd pension pillar is available in your internet bank or by contacting our consultants here.

Are you not saving up yet? Start now and take the opportunity to improve your financial situation at old age.

According to the forecast of the Central Bank of Latvia*, your savings in the 1^st and 2^nd pension pillars will be able to ensure no more than 40% of your average income. This means only 400 euros instead of 1000 euros.

* Avots: makroekonomika.lv

How much do you need to save?

By transferring 100 euros to the 3^rd pension pillar every month with the expected average annual return of 2.1%**, you can increase your pension capital by 17,000 euros** in 13 years. By choosing to save in the 3^rd pension pillar, you can decide for yourself how to handle the accumulated capital when you reach the age of 55!
You are the one who decides what your future pension will be:
Your accumulated amount at the age of 65 if you started accumulating at the age of 46, 52 or 60, EUR**

Your monthly payment 46 y. o. 52 y. o. 60 y. o.

EUR 30 8 329 5 343 1 904

EUR 50 13 883 8 906 3 173

EUR 100 27 766 17 812 6 347

EUR 150 41 649 26 718 9 521

Your monthly payment	46 y. o.	52 y. o.	60 y. o.
EUR 30	8 329	5 343	1 904
EUR 50	13 883	8 906	3 173
EUR 100	27 766	17 812	6 347
EUR 150	41 649	26 718	9 521

**Calculations were performed by Luminor Latvijas atklātais pensiju fonds AS taking into account the indicated amount of monthly contributions and the investment period from the indicated age to 65 years of age. The expected average annual return of 2.1% is based on the following portfolio: 80% MSCI World (5.1% historical average annual return for the period from 31.12.1987 to 30.04.2020) and 20% Bloomberg Barclays Global Aggregated Bond (as at 11.09.2020, yield to maturity 0.9%). The forecast of accumulated capital is calculated on the basis of cumulative growth, without taking into account commissions and possible income tax deductions that may be applied when receiving the amount of savings. The amount of the savings and the expected return are theoretical assumptions and cannot be considered as a guarantee.

Not sure how the pension system actually works? Take a look at our Q&A section

What are the differences between 1^st, 2^nd and 3^rd pension pillars?

The Latvian pension system consists of three pension pillars*:

1^stpension pillar – the state mandatory unfunded or non-accumulating pension scheme, which includes all residents who are making social insurance contributions or whom social insurance contributions are made for. In this pillar, you are both saving for your retirement and taking care of current pensioners. This pillar provides that the longer you work and pay social security contributions, the higher your pension in old age.
The 2^nd pension pillar is a state-funded or accumulating pension scheme. This gives you the opportunity to save in addition to the state old-age pension provided by the 1^st pension pillar. Its goal is to increase your pension capital and the amount of your pension by accumulating and investing part of your social contributions in the financial and capital market – in securities and bank deposits. The 2^nd pension pillar was introduced on 1 July 2001. As of this date, part of the state social insurance contributions made is not paid to existing pensioners, but is invested and accrued for the pension of the specific person.

Contributions to the 2^nd pension pillar are made automatically from your gross salary as part of social security contributions. Currently, 20% of your gross salary is registered in the pension capital, 6% of which is directed to the 2^nd pension pillar, and 14% – to the 1st pension pillar.
Participation in the 2^nd pension pillar:
- Mandatory for people born after 01.07.1971.
- Voluntary for people born from 02.07.1951 to 01.07.1971 (inclusive)
- People born before 01.07.1951 (inclusive) may not apply.

The contributions made are credited to the individual pension account of the participant of the specific pension pillar. Each participant has the right to choose the pension fund manager and pension plan.
The 3^rd pension pillar is the opportunity to voluntarily create additional savings for your pension. This means that in addition to the 1^st and 2^nd pensions pillars, a person can individually or through their employer invest a part of their income voluntarily in one of the private pension funds.

The amount of money that the participant or their employer regularly contributes to the pension fund is invested in various securities and, depending on the investment strategy selected, the general situation in the financial markets, and the activities of the fund manager, ensures an appropriate return on investment.

If the contributions to the private pension fund are made by an individual, then they are entitled to receive the personal income tax relief provided for in regulatory enactments (currently 20% of contributions not exceeding 10% of gross annual salary (including life insurance with savings), and the maximum recoverable amount is EUR 4000). In order to use the relief, it is necessary to submit an income declaration to the State Revenue Service (in the following calendar year).

Source of information: manapensija.lv

How do pension funds work?

Savings of participants of the 2^nd and 3^rd pensions pillars are managed by the fund manager by investing in financial instruments in accordance with the investment policy of a specific pension plan. This means that in the long run, your contributions can grow faster thanks to the compound interest that is typical for investing in financial instruments.

It is particularly important to choose the right pension plan for you, so that its investment strategy corresponds to your risk perception and brings the desired result. If you are young and you have many years left until retirement, consider choosing the riskiest strategy with the largest share of stocks – in the long run, stocks tend to show the highest yield, but also carry the greatest risk of fluctuations. On the other hand, if there are only a few years left until retirement, then look at the most conservative strategy with a higher share of bonds. This will not bring too much return, but will help to avoid higher short-term losses.

Ask our consultants more about how pension funds work and what is the most suitable pension investment strategy for you

How much do I need to save?

In the beginning, you need to understand what your income goal is for old age. Think about what income you have today, how much you have already saved up or invested, whether you have any additional assets that can help secure a prosperous old age. The difference between what you have now and what you want to get when you retire will be your savings goal. Several experts believe that at least 70–80% of a person’s income is needed to feel comfortable in old age. Set your goal and take action.

Contact our consultants here

Investing in pension funds involves risk and can generate both profits and losses. Investors should carefully assess their financial situation in order to understand the risks involved and ensure that one’s situation is suitable before making any investment, ceasing to invest or entering into any transaction. The investor is responsible for the investment decisions made, so before making a decision, you should read the documents related to the pension fund, which are available on luminor.lv/en/3rd-pillar-pensions and luminor.lv/en/information-participants#information-for-participants. Historical results do not guarantee equivalent results in the future and cannot be considered as the only factor to consider when choosing a particular investment. Past amount of earnings does not guarantee the same amount of future earnings. The value of an investment may decrease or increase and in some cases the investor may lose all the funds invested. Return on investment is not fixed and may fluctuate over time. The value of investments that involve foreign exchange risk may be affected by exchange rate fluctuations. Tax rates and tax base, as well as allowances, can change and become disadvantageous for you. The information provided here does not constitute an offer (or a potential offer) with regard to selection of any pension plan, investment or participation in a particular investment strategy. Luminor shall not be liable for any losses incurred as a result of the placement of the investment and / or the use or interpretation of the information provided herein.
Pension plan prospectuses, as well as other information about pension plans and the fund manager can be obtained on the Luminor website luminor.lv/en/pensions, as well as:
- in the branches of the State Social Insurance Agency
- at the fund manager Luminor Asset Management IPAS, Skanstes Street 12, Riga
- at the fund holder Luminor Bank AS Latvian branch and its Customer Service Centres, phone: +371 67 17 1880