Estonian savers undeterred by falling global stock markets | New


In the third quarter of this year, second pillar pension funds (referring to employer/employee contributions – editor’s note) fell by 6%, or 270 million euros in annual comparison. In the second quarter, the decline was even greater: 19% or 1.3 billion euros. However, according to fund managers, this has not made people look for more profitable investment venues.

More than 500,000 are members of the second pillar, whose membership was made optional under the Centre/EKRE/Isamaa administration which left office in early 2021; Savers’ funds are mainly held in Swedbank’s pension funds, Age Petter, head of Swedbank Investeerimisfondid AS, at,d ERR.

Petter said: “The market volatility this year may have led to increased interest and awareness of what investing means, what stock market rallies and troughs are and how they affect everything. .”

“If you look at the movement between funds, or in general in the accumulation in the second pillar, it is clear that pension reform has had the greatest impact.”

Since September, however, the largest pension fund in Estonia has been LHV Pensionifond L, and it also happens to have given the best return in the market over the past 12 months, said Vahur Vallistu, head of LHV Asset Management. , to ERR:

Vallistu said: “Three LHV funds – M, L and XL – have a positive return. L is almost 4%, if you look at the current year.”

“We have seen that over the past six months the movement of people into this fund has been the largest. In LHV funds as a whole, this year we are being taken from competitors rather than given away,” Vallistu continued.

Petter said the same thing happened at Swedbank, looking at customer movement patterns on those dates when it is possible to switch funds or receive payments.

“During a transition period, approximately 3,000 to 4,000 requests are made to join our funds, while another 2,000 to 3,000 requests are made by our fund holders to go to a competitor,” he said. -she adds.

Only three funds continued to generate positive returns

In terms of performance, only three LHV funds achieved a positive return among all Estonian pension funds over the past year, reports ERR.

At the same time, all the specialists stressed that retirement savings are a long-term investment, adding that annual fluctuations should not be a major cause for concern.

On the other hand, there are those who believe that actively overmanaged pension funds end up being more harmful than passively managed and relatively safe funds that invest in indexed funds.

The future cooperative (Tuleva ühistu) was created several years ago with this aim: to make administrative costs more affordable by investing funds in index funds.

However, the investments of this cooperative are also decreasing, conceded fund manager Tõnu Pekk. “Our pension fund accumulators earn at the average return of the global market. That is our goal. year, however, these stock prices have declined, so since the beginning of this year, the unit value of our fund has also declined in line with global stock prices.”

However, Pekk pointed out that investors in the future cooperative are well informed and know that the best way to achieve good returns in the future is to continue to buy shares regularly, both when prices fall and when prices increase.

The cooperative is also a growth sector, he said. “There are always people leaving, but there are far fewer people leaving our funds than bank funds, and collectors continue to contribute regularly. As a result, the volume of our pension funds has increased this year, despite declining inventory prices.”

At the same time, investments in the “third pillar”, referring to private pension schemes, also increased year-on-year, by 17% in the past year, to around 400 million euros, fund managers said.

fund management confirmed that interest in investing in pension pillar III continues to grow every year. The total amount of assets there is about 400 million, having increased by 17% during the year.

Tõnu Pekk said: “Before saving elsewhere, it is a good idea to take advantage of the third pillar with its excellent tax reduction, in which you pay €100 and then the state immediately refunds you €20 in income tax. This opportunity should be used first, and only then should you start looking for alternatives.”

The “first pillar” of the Estonian pension system refers to the state pension.

More information on the Estonian pension system here.

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