The choice of usage of capital accumulated in the 2nd pension pillar can be postponed

On 2 April the Saeima adopted amendments to the State Funded Pension Law, determining that people, when claiming the retirement pension, will be able to postpone the choice of usage of capital accumulated in the 2nd pension pillar until 30 November 2021. Thus, 2nd pension plan participants are given the opportunity to wait for the financial markets and also their savings to recover from the effects of the current downturn.

Kristīne Lomanovska, Member of the Board of SEB Life and Pension Baltic: "At this time, when we are all worried about the ongoing processes in the country and in the world, this is a very positive message for those who are planning to retire, and there are many of them. If these changes had not been made, unfortunately, a large proportion of 2nd pension pillar participants would have received a smaller pension. I would like to thank all my colleagues and government officials who understood the importance of making these changes."

The funds allocated to the 2nd pension pillar (6% of gross salary) are invested in the financial markets, and the change in the value of savings depends on the events in the world economy. Considering the downturn in financial markets around the world caused by the coronavirus, long-term savings are currently experiencing a decline in value.

Those who are still far away from retirement age, need not worry because financial markets are cyclical and the lows are always followed by ups. However, the current situation may be worrying for those who will retire in the near future. The current procedure provides that upon retirement, it is mandatory to choose whether to add the 2nd pension pillar savings to the 1st pension pillar or to conclude a Lifetime Pension Insurance Policy. If currently, when you retire, you choose one of the two options for receiving the money accumulated in the 2nd pension pillar, you will retire at a very low market moment and with lower savings.

According to the amendments, this choice can be postponed until the end of November next year.