OREANDA-NEWS. May 15, 2012. People living in Estonia and Latvia prefer to accumulate in pension funds with an above-average risk, whereas Lithuanians prefer to accumulate their pension buffers in pension funds that pursue balanced strategies, revealed analysis by SEB Varahaldus of the preferences of those accumulating pensions, reported the press-centre of SEB.   

In Estonia, more than 600 000 people have joined the second pillar, and more than 70 per cent of them have opted for pension funds with an active strategy. Nine per cent have opted for pension funds with a conservative strategy and 14 per cent for those with a balanced strategy.

In Latvia, more than 1 164 000 people have signed up for the second pillar; of those, more than 60 per cent have opted for an active strategy. Twenty-nine per cent have opted for a conservative strategy and 9 per cent for a balanced strategy.

In Lithuania, 1 560 000 people are accumulating pension assets in second pillar pensions, and 80 per cent of them have opted for a pension fund with a balanced strategy, whereas 11 per cent have a conservative fund and 6 per cent an active one. For all three countries, the data were provided as at 26 April 2012.

According to Indrek Holst, Chairman of the Management Board at SEB Elu- ja Pensionikindlustus, the results are due to multiple reasons. “Definitely, the main reason is a higher proportion of younger people amongst pension fund investors. In Estonia, signing up for the second pillar is mandatory for those born after 1983, since the share of the first pillar in a future pension is going to decline over time, primarily due to the demographic situation in Estonia. The young have a long accumulation period, as a result of which they tend to prefer active pension funds (SEB Progressiivne and SEB Energiline pension funds).

Another reason for the preference for active funds is the inception of the second pillar pension system in 2002, when the economy and the stock market were trending up, with a lot of clients preferring high risk pension funds as a result. Irrespective of the long accumulation period, the drop on the financial markets a few years ago nevertheless gave people the “new experience”, as it were, of risks becoming a reality. On the upside, it may be said that, for a pension system in a relatively early phase, the crisis delivered a clear lesson – people came to better understand risks and their individual risk tolerance. We at SEB, too, advise our clients to review their risk tolerance from time to time and accumulate their pensions in funds with appropriate risk levels,” Indrek Holst noted.

For its pension fund clients, SEB has developed a Pension Plan that helps the clients to obtain a comprehensive overview of their pension assets – in terms of both second and third pillar products – regularly (for instance, every three or four years). By using the Pension Plan, it is easy for clients to see how their pensions will shape up given the contributions selected, specifically, how much may be expected from the first two pillars and what kind of added value will be provided by a third pillar product.