Aizvērt

2-nd Tier – Mandatory State Funded Pension Scheme

The 2nd tier of pension scheme was introduced on 1 July 2001. After the above date, a share of all social insurance contributions is invested in a financial market and accumulated on a personal account of each participant of the 2nd tier. Any socially insured person can be a participant of the state-funded pension scheme if he/she at the beginning of the scheme on 1 July 2001 was of the age under 50.

Participation in the 2nd tier of the pension scheme is mandatory for those, aged under 30 by 1 July 2001 (born after 1 July 1971). Step by step, all employed persons will be involved in the 2nd tier. But those aged 30 to 49 (born in the period of time between 2 July 1951 and 1 July 1971) could and still can join the scheme voluntarily. If you belong to this age group and have decided to participate in the 2nd tier of the pension scheme, you should address an application to the State Social Insurance Agency.

Make responsible choice when selecting your investment plan of the state-funded pension scheme!

When choosing a corresponding investment plan, an expected period of participation of a person to the state-funded pension scheme (2nd tier of pensions) till retirement is an important factor. The longer the period till the pension, the more capable is the person for undertaking a bigger risk and vice versa — the closer is the pension age, the smaller is capability to undertake the risk.

Therefore, the persons who have 10 or less years left till retirement are recommended to transfer from active to conservative investment plans. Otherwise participants of active investment plans could experience very rapid negative fluctuations of the accumulated capital shortly before retirement, and this will significantly affect the amount of the expected age pension.

Basic information that will help choosing the most appropriate investment plan. As of 1 April 2015, the participants of the state-funded pension scheme (SFPS) have access to a document, which is developed by asset managers, “Basic Information”. The aim of the document is provision of additional information about asset investment risks and management costs of the SFPS's investment plans in order to simplify the choice of the most appropriate investment plan for SFPS's participants.  The basic information about all 20 investment plans can be found here.

Opportunities to receive additional information about the state-funded pension scheme (2nd tier of pensions).

Website www.manapensija.lv, section “Current Statistics”, each working day publishes information about investment plan's net asset value, share of change compared with the previous day, number of participants, and performance in various periods of time.

In the single state and self-government services portal www.latvija.lv, section “E-services” provides the following information: when has participation in the SFPS has been launched, what is the amount of the accumulated capital, as well as you can see the manager of your assets and history of changes to your investment plan. This information can also be obtained in any division of SSIA.

An application to change/choose the manager of capital assets of the state-funded pension and investment plan can be submitted:

Application for printing out

Participants of the 2nd tier of pension scheme do not need to make additional social insurance contributions. The total amount of contributions to the pension capital (20% of income) do not change and is redistributed between the 1st and 2nd tier of the pension scheme.

The redistribution of the total pension capital contributions between the 1st and 2nd tier of the pension scheme:

Years

1st tier

2nd tier

2001–2006

18%

2%

2007

16%

4%

2008

12%

8%

2009–2012

18%

2%

2013–2014

16%

4%

2015

15%

5%

2016

14%

6%

Contributions to the 2nd tier of the pension scheme are registered in the fourth month that follows the reporting month. Thus the contributions made in January 2015, indicated in an account statement, were calculated after the income of September 2014, while contributions made in May 2015 were calculated after the income of January 2015.

The contributions to the state-funded pension scheme are calculated multiplying them by a contribution rate of the same year.

The amount of the money accumulated in the 2nd tier's account is affected by:

  • amount of wage;
  • amount of contributions to the 2nd tier;
  • period of participation to the 2nd tier;
  • profit depending on the manager of the funded pension assets and investment plan chosen by you.

In the 2nd tier of the pension scheme, additional accumulation for the pension is formed, when a part of the pension capital, which is registered on the personal account, is invested in shares, obligations, and other securities, as well as in bank deposits. Investing is carried out by an intermediary, a licensed asset manager. Thus the pension capital grows in a more rapid way than inflation and average salary in the country. When retiring, participant of the 2nd tier will be able to choose to add the pension capital, accumulated in the 2nd tier, to the accumulation of the 1st tier and receive both pensions together or to trust the 2nd tier's capital to an insurance company, which is individually chosen, that will on a regular basis pay the pension according to policy provisions.

Who can be an asset manager?

The assets of the state-funded pension scheme can be managed by investment management companies that are registered in the register of the state-funded pension scheme asset managers; and such register is maintained and updated by the Financial and Capital Market Commission.

Publicēšanas datums: [14.07.2016.]