Financial Services, Funds, Investments, Legislation, Lithuania, Pensioners

In 2011, SODRA transferred to the second pillar pension funds 380.8 million litas, that was 17.3% more than in 2010; however, total assets managed by the pension funds increased less – by 224.7 million litas. Over the year, the assets increased by 5.8%, writes LETA.

"Last year, SODRA transfers to pension funds were increased by the rise in the average monthly wage, however, the growth of the assets of pension system participants at the same rate was prevented by poorer investment results and payments to the participants who left the system", said Vilius Sapoka, Director of the Financial Services and Markets Supervision Department of the Supervision Service of the Bank of Lithuania.

In 2011, the average value of all 2nd pillar PFs declined by 2.9%. The negative return was recorded by 18 out of 30 second pillar pension funds, one fund operated for the period shorter than a year, while the asset value of 11 funds increased. In the last quarter, a certain turning-point was reached – the return of 23 funds was positive, which evokes optimism.

Poor sentiment prevailing in the market due to debt problems of euro area countries mostly affected the results of riskier funds. Last year, the unit value of small equity share PFs declined on average by 0.4 per cent, that of medium equity share PFs went down by 4.2%, while the unit value of stock PFs plunged by as much as 10.8%. In 2011, the return of only conservative investment PFs was positive, while the unit value of such funds increased by 1.4% on average.

"Taking into account the events in the global financial markets in 2011 and in order to protect the assets of pension fund participants, the fund managers, which in previous years invested a part of the funds in the securities of Greece, Spain, Portugal, Italy and Ireland, i.e. the countries that are currently considered risky, this year invested much more money in Lithuania", stated Vilius Sapoka.

The share of direct investment of PFs (shares, bonds, Government securities) in Lithuania increased over the year from 53.03% to 64.47%. This jump was mostly determined by the increase in investment in Lithuania's government securities of 30.3 pe cent (from 751.16 million litas to 978.86 million litas).

Last year, the total investment of the assets of the second pillar PFs in Lithuania made up 31.72% (1.29 billion litas), while investment abroad accounted for 68.28% (2.79 billion litas). In 2010, these shares of investment made up, respectively, 28.04% and 71.96% of the total assets of the second pillar PFs.

Medium equity share pension funds remained the most popular in 2011: more than 581,000 of participants (55.1%) accumulated their pension in these funds, whereas the asset value of these funds made up 2.102 billion litas or 51.5% of the total assets of PFs. The share of participants accumulating their pension in stock funds increased slightly in 2011 (from 8.05% to 8.91%).

The assets managed by the most risky funds – stock funds – increased by 9.6% (to 320.7 million litas); similar increase was observed in the assets of conservative investment funds – nine% (to 565.1 million litas). The assets managed by small equity share pension funds increased by 7.2 per cent (to 1.09 billion litas), while the assets managed by medium equity share pension funds went up by 3.8% (to 2.1 billion litas).

Uncertainty about indebtedness of some EU states affected confidence in the euro area currency: investment in euro declined from 71.03% to 66.7% and made up 2.72 billion litas at the end of 2011, whereas the growth of investment in Lithuania's government securities (from 13.46% to 15.22%) increased the investment of PFs assets in the national currency, which made up 621.12 million litas.

Thirty second pillar pension funds operated in Lithuania at the end of 2011. The number of participants who accumulated their pensions in these funds was 1,054.4 thousands, which was 18,711 (1.81%) higher than in 2010.

Last year, 31,106 participants (2.95% of the total number of participants) decided to change pension insurance companies, while 8,473 participants changed pension funds within the same company.