Currently there are seven managers of 2nd pension pillar assets registered in the register of the state funded pension scheme. Each of them offers one or more investment plans, making the total number of options exceed 29. Learn more about how to not get lost in the offer and choose the plan that suits you best?

We offer three simple steps that will help you make a choice.

1.Step 1: Choose the risk level!

There are three types of second pension pillar plans: active, balanced, and conservative. The main difference between them is the percentage of the pension plan's assets invested in stocks. The higher the percentage of investments in stocks, the greater the potential return, but it comes with higher risks due to the unpredictability of financial market fluctuations.

The less the manager invests in stock market and more in the government and corporate bonds, promissory notes, deposits with credit institutions and other similar financial instruments that ensure a predictable yield, the lower the risk, but also the lower the yield.

• Active plans. In these plans, the maximum share of stocks can range from 50 to 100% of the pension capital, potentially yielding higher returns but also carrying higher risks. However, young individuals should not be afraid to choose more risky pension plans, as over time, fluctuations in investment value are likely to even out, and in the long term, the higher returns from these plans will help accumulate more pension capital.
• Balanced plans. In order to balance volatility and possible profits, the share of stock market investments in balanced plans is up to 25%, thus reducing the risk and ensuring medium yield. Balanced investment plans may be suitable for people who have more than 10 years left until retirement, as it is advisable to choose a plan with a lower risk during this period. The balanced plan will be the middle ground between the investment plans with higher risk as in active plans and low-risk investment strategy as in conservative plans, which is usually chosen at pre-retirement age.
• Conservative plans. A conservative investment strategy is appropriate, if safe and stable, albeit small capital gains, are important to you. In this case, the manager invests all funds in international financial instruments with a fixed yield – in government and corporate bonds, promissory notes, deposits with credit institutions and other similar types of investments. Usually, conservative plan is chosen by people with less than 10 years left until retirement, and they do not want to take unnecessary risks, because they need to focus on maintaining their pension capital with minimal fluctuations, rather than aiming at high yields.

To sum up, younger individuals are recommended to choose an active plan, which will allow them to accumulate more capital due to higher returns. For those of older age, a plan with lower risk is more suitable because at this stage, it is more important to preserve accumulated savings rather than focus on higher profits. The key thing to remember is that a higher percentage of investments in stocks means higher potential returns, but also higher risks. And if retirement age is approaching, sudden fluctuations in the stock markets can lead to direct losses in your pension budget.

Step 2: Choose a fund manager!

Find out who is currently managing your pension plan and what investment strategy they are implementing. A manager with more years of experience has already been through financial shocks, during which they had the opportunity to learn how to react to various crisis situations and solve them. It is also important to consider the geographic distribution of investments. If the manager diversifies the investments across different industries and global regions, they can thereby reduce risks during times of financial market upheavals.

For example, Signet Pensiju Pārvalde IPAS has been managing various investment funds for over 15 years, ensuring broad investment diversification - geographically, across industries, and asset classes. Moreover, the company invests not only in promising international enterprises, but also local ones. Therefore, participants in the Signet Active Plan grow their pensions by earning from the development of these enterprises and support the development of the Latvian economy.

Step 3: Choose a second pension pillar plan!

Once you have determined an acceptable level of risk and chosen the most suitable fund manager, all that remains is to choose the right pension plan. You can familiarize yourself with the results of all second pension pillar plans on the website manapensija.lv. Whatever you choose, remember that you can change the second pension pillar plan fund manager once within a calendar year, and you can switch from one plan to another with each fund manager twice within a calendar year. Therefore, if you decide to change the selected pension plan after some time, you can do so without any additional costs.

You can find out which asset manager is managing your 2nd pension pillar capital by going to www.latvija.lv and opening page “SSIA Information and Services”. If you want to change your asset manager, select the online service"“Selection or change of the investment plan for 2nd pension pillar”.