Citizens’ confidence in the Latvian pension system has increased by nine percentage points over the past two years, according to the latest “SEB“Pension readiness index data.
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At the same time, the population’s knowledge of how a pension is formed and how large it will be has also increased by 13 percentage points.
At the beginning of 2019, 31% of the survey participants believed in the sustainability of the Latvian pension system, but at the end of 2020, already 40% of the surveyed economically active population under the age of 55. In addition, more than a third (37%) of respondents have found out how much their future pension will be according to their existing tier 1, 2 and 3 pension assets, a significant increase compared to 2019, when only 24 %.
“The increase in confidence and knowledge has been driven by a number of events. First, the offer of investment plans is constantly being improved and expanded – both 75% and passively managed investment plans are available to clients. In addition, management fees are regularly reduced. investment plans have recovered from the downturn caused by Covid 19. Thirdly, pension managers are increasingly thinking about sustainable investment, an aspect that is becoming increasingly important for customers, and fourthly, public confidence in the pension system has been inheritance even if its creator divorced before reaching retirement age, “says Kristīne Lomanovska, Member of the Board of SEB Life and Pension Baltic SE.
Although 80% of SEB’s surveyed economically active population under the age of 55 is aware of the possibility of inheritance, only a quarter (25%) have so far indicated their choice. When asked why they did not make a choice, the majority (67%) of the respondents indicated that they simply did not have time for it.
On the other hand, looking at the data on those participants of the 2nd pillar of pensions who have indicated their choice, it can be seen that this was more often done by those closer to retirement age, as well as those with a monthly income of more than 1,500 euros per month. Also, married or partner 2nd tier pension participants are more likely to indicate their choice than those who are not currently in a relationship.
“More than 10 years ago, when the debate on the inheritance of tier 2 pensions began, we emphasized that it was an important element in raising the overall level of confidence, so it is gratifying to see that public confidence in the pension system has indeed increased. only a quarter of our respondents have made their choice, it seems important to believe that the accumulated capital is the participant’s own money, which can be freely decided, but at the same time our survey data show that, in general, interest in 2nd pillar pension savings remains low. – During the last year, only about a third of pension tier 2 participants have considered the amount of their accumulated capital. However, only by following their savings, it is possible to make a considered decision not only on the most suitable choice of inheritance, .
From 1 January 2020, any member of the 2nd pillar of pensions before retirement age can choose what will happen to the accumulated capital after his or her death. The regulation provides for three options: to add the accumulated capital to the state budget, to add the pension of the same chosen person to the 2nd level savings or to leave it in inheritance in accordance with the procedures specified in the Civil Law.
The SEB Pension Readiness Index survey was conducted in December 2020. The survey involved 531 economically active people aged 18 to 55.
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