What to do with your 2nd pillar pension capital upon market downfall?
March 25, 2022

Economic crises and stock market downfalls are natural. History shows, that economy deceleration happens on average every eight years, while bigger crises come on average every 15-20 years. Therefore if you are more than 8 years away from your retirement age, it is highly likely that you will go through at least one more economic downfall, which will affect your 2nd pillar pension capital at that time. Especially, if a major part of it was invested in stock.

Upon assessing performance of various 2nd pillar pension managers, one should keep in mind that it is natural for the stock market to experience fluctuations. Whenever something unexpected is happening in the world, it may have major impact on the economy and subsequently on stock and bond market, causing short-term losses. However, in long-term perspective the yield usually exceeds losses, because every crisis is followed by economic progress.

Therefore, when crisis comes and when you see stock market indices plummet, stay calm and don’t make rash decisions.

What actions will be best in long-term perspective now?

  • Choose a 2nd pillar pension plan that suits your age. Regardless of rise or fall on the stock markets, choose a pension plan that is suitable for you, because it can have major impact on your pension capital amount when you retire.
  • Do not change your pension plan to a conservative one, for example, only because there is an economic crisis right now. It is a common mistake. Changing the pension plan takes up to 2 weeks, therefore by the time it will be completed, both the current and the new plan performance data may differ greatly – one could go up, the other one could go down. Moreover, the conservative plans are usually of lower yield, which causes also slower recovery from the losses caused by the plan with higher stock share.
  • Pay attention to the historical performance of your pension asset manager. Even though the historical performance does not guarantee the same performance in future, still looking back on it through the years gives a good perspective on how the manager has been dealing with various market situations – in both crisis and progress periods.

A manager with more experience must have been through many financial turmoils, which taught him how to properly react on any kind of crisis situation and solve it. Geographic diversification is also important – a good manager always diversifies his investments in various industries and regions of the world, thus reducing risks in times of financial market shocks and recover from them faster. For example, Signet Pensiju Pārvalde IPAS ensures wide diversification of investments, both by geography, industries, and asset classes, and in 15 years of operation our investment specialists have proven they are able to provide high long-term performance also in changing times.

To sum up, keep in mind that stock markets are regularly in fluctuations, yet you should stay calm and stick to the chosen plan in order to keep earning together with the global economy, because the ultimate goal of any pension plan asset manager is to invest at a profit.

Signet Pensiju Pārvalde IPAS
Antonijas Street 3, Riga, LV-1010
+371 6700 2777

Business hours:
I-IV: 09.00-17.30
V: 09.00-14.30

[email protected]
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