Is your 2nd pillar pension capital safe?
March 25, 2022

Speaking about 2nd pillar pension, a question often arises with people, if their pension capital is safe – where it is kept and who is supervising it. Those are important questions, because 6% of your gross salary or any other income automatically goes to 2nd pillar pension as social insurance contributions. But this money still belongs to you, therefore it is important to know it is safe.

The contributions received in 2nd pillar pension scheme are forwarded to the asset management company of your choice, and this company invests your capital in order to gain profit to ensure you higher income in retirement ages. For example, Signet Active Plan has chosen an active strategy, providing investment of 50% of assets into stock of commercial companies, while the rest of the assets are invested in government and corporate bonds of fixed income in order to ensure stable growth of the invested capital, protecting it the impact of short-term fluctuations. 

2nd pillar pension management is always conducted through a custodian bank, whose task is not only to store the funds of the 2nd pillar pension, but also invest the pension capital in financial market, following the manager’s instructions and the investment plan policy.

Can the funds vanish if the custodian bank becomes insolvent?

Pension savings are kept completely apart from the pension manager’s and custodian bank’s funds. Therefore, even upon insolvency of the custodian bank, these funds would not be subject to collection and upon such situation they would be simply transferred to another bank.

Can the funds vanish if the asset management company seizes activities?

If the investment management company seizes its activities, the 2nd pillar pension funds managed by the such company shall be transferred to another investment management company under close supervision of the competent authorities thus ensuring its safety.

Who is managing the 2nd pillar pension account?

For each member of the 2nd pillar pension plan, the State Social Insurance Agency has created a separate account, where all the 2nd pillar pension contributions and profits of the pension plan are registered, recording every move. You can request the latest data about your 2nd pillar pension capital in the unified state and municipality portal or by arriving in person at any division of the State Social Insurance Agency. In the statement you will see both how much you already have saved and how much this saving has earned for you. Learn how to read and how to read and understand 2nd pension pillar participant’s account statement.

Important! The amount of your 2nd pillar pension savings depends on:

  • Amount of your salary
  • Effective rate of contributions – currently 6%
  • Skills of the asset manager and profitability of the chosen pension plan in the given period
  • Period of membership in 2nd pillar pension scheme before requesting the retirement pension.

Who is supervising the operation of the 2nd pillar pension asset manager?

The operation of the asset manager and the custodian bank is carried out by the Financial and Capital Market Commission, which ensures the compliance of the asset manager with the highest regulatory and security standards in financial industry. Investment management companies are entitled to provide their services only if they have obtained a license issued by the Financial and Capital Market Commission and have developed their 2nd pillar pension plans in accordance with the criteria stipulated in the regulatory enactments, according to which they invest in stock and shares.

Therefore one can be sure that their 2nd pillar pension capital is safebecause it is being taken care of not only by the asset manager, but also supervised by the custodian bank, State Social Insurance Agency and Financial and Capital Market Commission.

In order to let your 2nd pillar pension capital earn as much as possible, it is important to choose a pension plan suitable for your age and purpose. In article “How to compare the second pillar pension plans wisely?" we have summarised the key criteria to help you make the right choice.

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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