According to the current regulatory documents, 6% of your gross salary or other income for which mandatory social contributions are paid are automatically forwarded to the 2nd pillar pension each month. Year after year, savings accumulate and your retirement age approaches, your 2nd pillar pension may have accumulated tens of thousands of euros. This money, although not immediately available, belongs to you, so it is worth knowing where it is managed, how successfully it is invested and what will happen to it if you pass away before claiming your retirement pension.
There are two optionshow you can make sure that your savings of 2nd pillar pension will do good for someone dear to you even if you ass away before starting to use the accrued capital.
Since 1 January 2020, any participant of the 2nd pillar pension plan who has not yet requested the retirement pension can fill in an application on portal www.latvija.lv and assign the capital accumulated in the 2nd pillar pension for inheritance. The application may also be submitted in person at the branch of the State Social Insurance Agency, sending it by post or electronically – signed with a digital signature.
Upon filling in the application, you will have to choose one of the three options:
If you do not want to leave your pension savings to someone in inheritance, when you fill in the electronic form on the state and local government portal www.latvija.lv, choose the option "transfer the state pension to the special budget" and in case of your death the savings will be paid to other pensioners. If you are a caretaker, for example, for children, the amount of savings will also be considered when calculating the pension – its amount will increase. This condition will also apply if you have not selected any of the three options for assigning the accumulated capital.
If you want to help to ensure a prosperous retirement for a particular person (for example, a spouse), by assigning your 2nd pillar pension savings for inheritance and adding it to the 2nd pillar pension savings of the selected person, you should select the option "add the indicated persons to the state funded pension capital" in the electronic form. Only one person who is also a member of the 2nd pillar pension can be specified in the form. If you indicate a person who is not yet a participant of the 2nd pillar pension and will not be the participant on the day of your death, the accumulated capital will in any case be transferred for inheritance in accordance with the procedures laid down in the Civil Law of the Republic of Latvia.
If you want to assign your 2nd pillar pension capital to your relatives (spouse, children, etc.), choose the option "transfer inheritance in accordance with the procedures laid down in the Civil Law". In this case, the savings will be acquired by the legal heirs (after testament or will) and after following a certain procedure and submission of documents to the notary, the heir will be offered to decide whether to withdraw the inheritance in cash (paying personal income tax for it upon withdrawal), or to add it to their 2nd pillar pension savings. When making a choice regarding leaving the accumulated capital in inheritance, specific persons need not be indicated, because inheritance in accordance with the procedures laid down in the Civil Law takes place through a sworn notary, arranging an inheritance matter. Heirs will be able to apply for the payment of the estate within 10 years. If they fail to do so, the capital will be transferred to the state pension special budget.
However, in case you pass away a few years after you retire, then regardless of your choice the accrued funds will be added to the state budget. If you do not want that to happen, consider purchasing lifetime pension certificate, because it will give you more control over the usage of your 2nd pillar pension capital both during your life and after your death.
When you decide to retire, you can sign a lifetime pension insurance agreementwith an insurance company of your choice, which will not only give you a chance to determine the periods and volumes of your 2nd pillar pension capital disbursement, but also will enable you to assign the unclaimed part of the accruals for inheritance in case you die before the end of the guaranteed disbursement period agreed upon with the insurance company. Moreover, the beneficiary can be any person, not only those provided in the Civil Law. If you fail to use this option, the funds accrued in the 2nd pillar pension will be automatically added to the state budget in case of your death.
Learn more about the benefits of the lifetime pension insurance agreement in our article "Lifetime pension insurance: is it worth it?".
Useful to know
1. It should be taken into account that the following amounts can be assigned for inheritance or added to the pension capital of the person of your choice:
2. You can change your choice for the 2nd pillar pension capital assignment procedure unlimited number of times.
3. The data on the accumulated 2nd pillar pension capital are available on the single state and municipalities government portal www.latvija.lv. You can also inquire this information by arriving to any office of the State Social Insurance Agency in person.
