When assessing the possibilities of moving from the current 2nd pillar pension plan to another one, people often wonder if they will not lose some of the accumulated money during the transition process? Even greater concern arises when the value of one unit decreases when switching to another pension plan, misleadingly suggesting that the losses have occurred.
What is actually happening?
The assets of each 2nd pillar pension plan are divided into small units with their own value per unit. The value of one unit of a pension plan can be, for example, 1.5 EUR, and another – 2 EUR. Accordingly, by changing the pension plan to another one with a smaller value per unit, your savings will be divided into a larger number of units of the new pension plan, although the total amount or the amount of accumulated capital does not change from it at all.
For example, if your pension accruals amount to 9000 EUR and the value of a unit in your current pension plan is 2, then the number of units will be 4500. While if in your new pension plan the value of a unit is 1.5, then upon switching to this pension plan your 9000 euros will be divided by 1.5, which makes 6000 units. This way smaller or bigger value of the unit does not affect the total amount of the accrued capital.
In addition, your pension plan savings are invested in financial instruments, the value of which changes daily, therefore the value of the unit of the pension plan and the total savings also grow or decrease every day in response not only to your contributions, but also to the market fluctuations.
If you decide to leave the current pension plan and to join the Signet Active Plan:
Accordingly, when you change your pension plan, at the exact moment you do not lose anything at all, nor do you gain anything. You will only be able to judge whether this transition has been successful after a while , when you can compare which of the plans has increased more in unit value since the change..
You can change the manager of the funds of the 2nd pillar pension once per calendar year, and the investment plan with each manager of funds - twice per calendar year (if the manager has several investment plans). You can make a total of five changes to the investment plans in one calendar year, although it would not be advisable to do so often, as the results can only be evaluated in the long term.
The easiest way to change the manager of the funds and the investment plan of the state funded pension scheme (2nd pillar pension) on the portal www.latvija.lv, select the type of authentication, confirm your consent to the electronic service terms and fill in the application for the selection or change of the 2nd pillar pension by selecting Signet Active Plan.
All steps you need to take in order to change your 2nd pension pillar plan are described here.