How do residents choose a suitable pension investment plan?

The amendments envisage that pension fund managers will receive quarterly information from the State Social Insurance Institution about their clients (pension secondary participants) and the investment plans they have chosen. The managers will target those members of investment plans who have accumulated pensions in plans that are not appropriate for their age (for example, the risk in the investment plan is too low or, on the contrary, too high) and send them personalized information letters – electronically or by post to the addresses declared by the plan members. In these letters, the managers will encourage you to choose an investment plan that is more appropriate for your age. After accepting the manager’s offer, each plan member must change his investment plan to a more appropriate state management service on the portal Latvia NetworkFrom now on, administrators will update the data annually and repeatedly inform participants who have chosen an unsuitable plan of the possibility of changing plans.

To determine whether a particular member’s age is appropriate for the chosen investment plan, pension fund managers use an investment lifecycle approach. This means that younger participants choose to invest more money in stocks, venture capital, etc. Securities that are comparable to them in terms of risk and can therefore expect higher long-term returns, but at the same time they also take on higher risk. Older participants approaching retirement age invest more of their funds in debt securities that have lower yields and are also less risky. In this way, the protection of accumulated funds from negative fluctuations in financial markets becomes greater, which is particularly important when retirement age is approaching.

Age suitability of an investment plan is not the only factor that a participant may be interested in, so managers need to provide more information about the plan to each interested participant. It can be information about the compliance of the investment plan selected by the participant with the desired risk level, asset management strategy, investment country and sustainability indicators of the investment assets.

Every citizen has a chance Be familiar with the investment plan information provided by all pension fund managers and the results on the website Manapensija.lvWhen familiarizing yourself with the issues associated with pension savings, it is not just the past returns of an investment scheme that are important. indexwhich are not guaranteed in the future, but also apply to participants in the investment plan Information Filesproviding more information about the most distinctive features of the investment plan in a concise, comprehensive and comparable manner.

As before, your Residents can only change pension fund managers and investment plans themselves on the National Service Portal Latvia NetworkOn the other hand, pension savings can also be viewed on the Internet platforms of regulators, banks and other financial institutions supervised by the Bank of Latvia. It is expected that this year the Internet banking of the largest banks in Latvia will provide information on pension savings, and the provision of such information platforms will gradually diversify.

In order to protect the members of the pension system, there are restrictions on data reporting. The maintainers of platforms such as online banking are entitled to only display information, but may not store the data of participants for their own needs and must delete it after reflection. Platforms reflecting the data of Level 2 pension customers are prohibited from displaying advertisements and any other type of information or asking questions, including questions that directly or indirectly invite you to choose a fund manager or any other service or its provider. This information may not be displayed unless the member’s electronic consent to access the account statement is obtained.

In general, citizens need to take a greater interest in ensuring future prosperity. Data from a population survey conducted by the Bank of Latvia show that nearly two-thirds (63%) of the working-age Latvian population surveyed generally know who manages their pension plan and the investment strategy. A third of respondents gave a negative answer – 22% were not interested, while 12% admitted that they did not know how to find out. Every second survey participant had consciously chosen a pension plan, however, half of the respondents had not considered whether the chosen pension plan was suitable and met the respondents’ intentions – 11% of respondents said they did not understand how and where to apply, 8% said they would like to receive personal consultation, and 22% answered that they would think about this issue when they approach retirement age.

In order to improve the long-term well-being of the population and inform the participants of the pension system, the administrator must evaluate the suitability of the existing investment plan for the life cycle or age of the plan participants, find out other factors that affect the pension system. Arouse the interest of participants and provide recommendations. The administrator should determine the needs of members at least every five or ten years. Ten years applies to participants who change their investment plan after determining their needs or choose a plan that meets their wishes, as well as participants who have reached the age of 55 and selected an age-appropriate investment plan.

We invite residents to choose an investment plan that suits them, take advantage of consultation opportunities with pension managers, familiarize themselves with the information they prepare, and act responsibly for their future well-being. At the same time, we remind you that fraud in the form of fake news has not stopped and you need to carefully evaluate who you discuss your financial situation with, including critically evaluating callers and senders of electronic messages.

* As with everything posted in the Opinion section, this is the opinion of the article’s author.