Questions and answers

Transparency in costs, confidence in choices, direct language – that’s who we are.

 

Our main principles:

 

Low commissions, because we believe that the manager’s profit should not be disproportionately high compared to the value offered to the client.

 

Transparency in costs and performance of pension plans.

 

Our implemented index approach in the Latvian pension system shows the best long-term results in the industry.

 

We are a local company that fights for positive changes that benefit every resident of Latvia.

The 0.12 % commission that people see on their account statement is VSAA’s administrative cost. They are collected from each contribution, not from the total amount of assets.

 

The cost of managing the investment plan comes “on top” of these costs.

 

To find out the costs of managing your pension plan, go to the link manapensija.lv and find your plan in the “Basic information for participants of investment plans” section.

No one can predict market movements, so asset managers can not promise specific returns. It is also practically impossible to predict. Instead, INDEXO is based on worldwide research on an approach that is highly reliable in delivering good long-term returns.

 

This approach is characterized by two factors:

 

1) Significantly lower costs. Full cost transparency. No investment in expensive self-managed funds.

Global research shows that low costs are the best predictors of likely future returns. We have written more about it here: https://indexo.lv/blogs/ka-komisijas-aped-tavu-pelnu/.

 

2) Investment in global financial market indices. The so-called passive philosophy of asset management.

 

Thought in a nutshell:

 

We do not try to predict market movements and pick the “right” stocks or bonds. World studies show that this is practically impossible. When actively buying and selling financial instruments, more is paid in brokerage commissions than it is possible to earn.

 

Instead, we invest in the global markets as a whole and hold the investment for the long term.

 

Market fluctuations are expected in the short term. Periods of both profit and loss are expected, which can last for several years. In the long term, the world economy develops, market indices rise and the investor earns.

 

You can read more about why this approach is being adopted by more and more investors around the world here.

Since 2021, the Latvian pension system is made up of three levels. The 1st and 2nd pension pillar are mandatory, while the 3rd pension pillar is voluntary.

1. The first pension pillar is based on the principle of solidarity. This means that you make tax payments, a portion of which is used to pay pensions to current retirees. The amount of taxes paid during your working life will be used later to calculate the size of your pension. However, this is not money that has been saved and set aside; the amount of your 1st pillar pension will depend on the state’s financial capabilities in 20, 30, or 40 years.
2. The second pension pillar is actual money saved specifically for you. This savings is accumulated automatically from your gross salary as part of social contributions. Every month, this amounts to 5%. It is not possible to make additional contributions to the second pension pillar—what you save will be based on the taxes you pay. Your pension manager, such as INDEXO, invests this money according to your chosen pension plan to help it grow over the long term. Then, upon reaching retirement age, you will receive this accumulated capital as a pension.
3. The third pension pillar is much more flexible, and you can start managing it from the age of 55, deciding how much pension or supplementary income you receive. Additionally, it is formed from voluntary contributions, so you can choose and influence the amount of your additional pension. It is known that the 1st and 2nd pension pillars can only provide 30-50% of your pre-retirement salary, so to receive a larger pension, many people use the opportunity to create additional savings in the 3rd pension pillar.

We have compiled the most important information you need to know about your pension in an informational booklet—”All About Your Pension.“

Every month, 5% of your gross salary is automatically transferred to the 2nd pension pillar through social contributions, and no additional funds can be contributed to it. For many, the second pension pillar is the largest lifetime savings, so it is important to choose a pension plan that suits your age.

All employees born after July 1, 1971, automatically participate in the 2nd pension pillar. Almost everyone born earlier participates by choice.

Although the exact amount of your pension will only be known just before retirement, you can get a pension estimate today using one of the pension forecast calculators, such as the INDEXO 2nd and 3rd pension pillar calculators.

The latvija.lv portal also offers an Retirement Pension Calculator, which calculates your pension based on data available from the State Social Insurance Agency (VSAA) and the information you enter. For more information on how to find out the size of your pension savings, read here: https://indexo.lv/blogs/cik-liels-ir-mans-pensijas-uzkrajums/

You can find all the performance results of the 2nd pension pillar investment plans, as well as other related documents, at manapensija.lv https://www.manapensija.lv/lv/pensiju-2-limenis/aktualie-dati/

However, we encourage you not to evaluate pension plans based on their short-term results, as the financial market is very volatile in the short term—it can rise and fall sharply within just a few days. It is better to assess pension plans based on their investment policy and long-term (5+ years) results.

We also want to emphasize that past performance does not guarantee the same results in the future. We have written more about this in our blog here: https://indexo.lv/blogs/pagaidisu-un-paskatisos/

Yes, the accumulated capital can be inherited by the designated heirs or according to the procedures established by the Civil Law.

We are proud that we, along with like-minded individuals, were the ones who made the inheritance of the 2nd pension pillar possible. Now it seems obvious, but until 2020, all accumulated capital was added to the state’s special pension budget and could not be inherited. Learn more about inheriting pension savings here: https://indexo.lv/blogs/ka-mantot/

By law, 2nd pension pillar is anonymous – INDEXO and other asset managers do not know who their clients are. Therefore, you can view your personal 2nd pension pillar savings and investment plan only on the Latvian state portal: https://latvija.lv/lv/Epakalpojumi/EP229/Apraksts

 

For a detailed statement of your second pillar pension savings, follow these steps:

 

1) Go to the link: https://latvija.lv/Epakalpojumi/EP222/Apraksts.

2) Log in to latvija.lv (by clicking on “Start e-service”).

3) Tick “I am familiar with the specified information”, and press “Next”.

4) Choose statement no. 3 “2nd pension pillar member’s account statement”, press “Next” (below).

5) Choose the year for which you want to receive data, and press “Next”.

6) Press “Download statement”.

You can change the manager of your 2nd pension pillar investment plan once per calendar year, while the investment plan with the same manager can be changed twice a year. You can make the plan change at latvija.gov.lv, under the section “VSAA Information and Services.”

 

To quickly access the correct section, click here and follow the on-screen instructions!

 

We also invite you to watch a video created by the Bank of Latvia on how to choose the most suitable pension plan and manager here.

 

That means if you haven’t changed your investment plan this year or have changed your plan but not the fund manager, you can join INDEXO.

 

If you have changed your fund manager this year (for example, from one bank to another), you can join INDEXO next year.

 

Good to know: If you submit a plan change request at the wrong time, your request will be denied, but that’s all – there will be no negative consequences.

On July 1, 2024, changes to the State Funded Pensions Law entered into force, as a result of which the 2nd pillar pensions is no longer anonymous.

 

From now on, pension managers will receive data on their clients every quarter. Including information about the pension plan chosen by the client with the specific administrator. It is the pension manager’s responsibility to ensure that their clients are in age-appropriate plans.

 

None of the managers will receive information about members who have changed pension managers. This means that unless you tell your bank or manager yourself about the plan change, no one will know about it. Even if the bank finds out that you have changed the plan, the law does not allow it to “retaliate” in any way – for example, by withdrawing the customer’s privileges or changing the terms of the loan. Therefore, you can choose the 2nd pension pillar investment plan freely, without fear.

 

To join INDEXO, go to the portal latvija.lv. Click here  – and you will immediately get to the right section of the portal.

The second pillar of the Latvian pension system is built with high security. The fund manager only directs where to invest the money but does not hold your savings. This means that any investment plan is as secure as any other.

 

In the case of INDEXO, Swedbank AS acts as the custodian bank for investors’ funds. For double security, all transactions go through the custodian bank and can only be executed with its approval. One of the main responsibilities of the custodian bank is to ensure that all orders comply with the law and the investment plan’s prospectus.

No. The segregation of funds held by the custodian bank ensures that the assets of any investment plan remain secure even if the fund manager experiences financial difficulties. In our case, the custodian bank is Swedbank AS.

Since the custodian bank holds investors’ funds separately, financial difficulties at the bank do not jeopardize the funds. For instance, during the “Latvijas Krājbanka” bankruptcy, pension funds remained secure at all times.

The market rises and falls. No one can control this. Therefore, no fund manager can guarantee that an investment plan will provide a specific level of return. The law also prohibits making such promises.

 

“INDEXO plāns Jauda 16–55” is INDEXO’s pension plan with the highest potential returns, and therefore, the highest expected volatility. Choosing this plan means understanding that financial market indices can be very volatile in the short term. There will be periods of profit as well as crises and market declines. Thus, this plan is recommended for younger investors aged 16 to 55.

 

The investment plan “INDEXO plāns Izaugsme 55–62” offers moderately high potential returns and moderately high volatility, making it suitable for investors aged 55 to 62.

 

Investing in market indices diversifies risk very effectively. Individual companies may stagnate or go bankrupt, but even if indices fall, they usually recover over time. In the long term, the global economy grows, and indices rise accordingly.

 

Therefore, for pension savings, investing in market indices with low costs is a very attractive choice. This is exactly what INDEXO offers.