Analytics, Financial Services, Funds, Latvia, Legislation, Pensioners

According to the estimates of the Association of Latvian Commercial Banks, contributions made by pension plan participants had provided EUR 2 billion of this amount, while investments have generated nearly EUR 400 million. At the end of March, the amount accumulated per participant of the pension scheme was EUR 1,916.

The FCMC noted in its report that during the first quarter of 2016 the weakest results were shown by those pensions plans that had been investing in stocks. The average yield of active pension plans was minus 0.75%, the yield of balanced plans was minus 0.07% and the yield of conservative plans was 0.57% in the first quarter of 2016.

In a longer run, the plans of the government-funded or second-pillar pension scheme have been generating positive yield. Over the past five years, their average annual yield has been 3.12%. while the plans that have been operating for at least 10 years have provided a net yield of 3.21% a year.

At the end of March 2016, the government-funded or second-pillar pension scheme had 1.257 million participants, including 803,000 people who had joined the active plans, 335,000 participants of conservative plans and 120,000 participants of balanced pension plans.

At the end of March 2016, there were seven companies in Latvia managing assets of the government-funded pension scheme and offering a total of 20 pension plans, including eight active, four balanced and eight conservative pension plans.

Latvia has a three-pillar  pension system. The first- pillar pensions are paid to the existing pensioners from the social contributions made to the state budget. The second or government-funded pension level implies that part of the social contributions is invested in the finance sector, ensuring bigger pensions in the future. The third pillar is operated by private pension funds based on voluntary contributions.