On the performance of 2nd tier and 3rd tier pension schemes for Q1 2011
Private pension funds
By end-Q1 2011, there were 191,691 participants in the private pension plans or by 1.1% more than at end-Q1 2010 (16.8% of Latvia’s economically active residents ).
As from the beginning of the year, contributions to the pension plans made up 4.2 million lats, or by 28.7% more than in Q1 2010 (compared to 3.2 million lats in Q1 2010). The volume of contributions to pension plans by individual participants grew more than twofold, while contributions by employers continued decreasing (24.0%) in comparison with Q1 2010 (see Figure 1).
CONTRIBUTIONS TO PENSION PLANS (as a percentage, lats)
In the reporting quarter, the amount of benefits paid out from the pension plan capital amounted to 1.4 million lats, and the greater part, or 93.7% of total benefits, was paid to beneficiaries upon retirement of pension plan participants, but 6.3% upon the death of a participant.
By the end of the reporting quarter, the pension capital accrued by pension plans totalled 114.5 million lats, and had increased by 15.2% in comparison with Q1 2010.
As a result of a decrease in pension plan investment value and due to the losses from foreign currency revaluation, the average annual return on pension plans fell and at end-March was 0.5% (see Figure 2), varying between -6.5% and 2.5% for individual pension plans (compared to 15.2% in Q1 2010, or between 3.9% and 19.7%).
RETURN ON PENSION PLANS (as a percentage)
Management of State-funded pension scheme assets
Until 31 March 2011, 1,129,003 participants or 98.6% of Latvia’s economically active population had joined the 2nd tier of the State-funded pension scheme. Of total participants of the State-funded pension scheme, 647,838 or 57.4% had joined the scheme on a compulsory basis , whereas 481,165 participants or 42.6% had joined the scheme voluntarily. During the reporting quarter, 95,312 participants of State-funded pension scheme (8.4% of State-funded pension scheme participants) had switched their investment plans.
At end Q1 2011, the volume of net assets of investment plans in the State-funded pension scheme had grown by 13.4% compared by the end Q1 2010 and accounted for 845 million lats.
The volume of financial investments of the State-funded pension scheme’s investment plans also continued growing and by end-Q1 2011 it was 847 million lats or by 12.9% up from the end of Q1 2010. As regards the investment structure, investments made in credit institutions continued declining already for the second quarter in a row, while investments in debt securities and other fixed income securities as well as investments in fund units continued growing (see Figure 1).
Figure 1 STRUCTURE OF STATE-FUNDED PENSION SCHEME INVESTMENTS (as a percentage)
During the first quarter of 2011, of total investments, 56% or 474.5 million lats were placed in Latvia, while 372.8 million lats were placed in 36 more countries, as well as in international financial institutions. Of total foreign investments, 88% were placed in the European Union member states.
Investment plan management expenses remained almost unchanged in Q1 2011 and made up 1.5% of the average net assets of investment plans (from the beginning of the year), of which 1.2% were used for conservative investment plans, but 1.5% and 1.7% for the balanced and active investment plans, respectively.
The average return on State-funded pension scheme investment plans in Q1 2011 was 0.9% (compared to 14% in Q1 2010), for individual investment plans varying from -3% to 3.8% (compared to year 2010 – from 3.4% to 26.1%).
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