A new information system will provide individuals with possibility to monitor their savings in the second pillar pension system

03.08.2011 RIG

Riga, Latvia, July 27 2011 – despite the fact that a three-pillar pension system has been functioning in Latvia already for 10 years, recent sociological survey shows that 40% of economically active population under the age of 60 do not know which asset management company is managing their money accumulated in the second pillar pension system. Moreover, 70% of the respondents have no idea how much money from their total social insurance contributions has been diverted to the second pillar pension system and, consequently, how much more money has their contributions earned. Up to now, it was rather time-consuming and cumbersome to obtain the above information. Therefore, Latvian Central Depository (LCD), who, in collaboration with State Social Insurance Agency (SSIA) is keeping the register of individual accounts for the second pillar pension system, has developed an information system that can be conveniently accessed by individuals willing to receive a detailed information about their contributions in the second pillar pension system.  

Though the majority of population are not informed about their savings and their asset managers, the survey carried out by the market and public opinion research company SKDS reveals that 38% of the respondents would be willing to learn about their savings in the second pillar pension system at least once a year. But 44% of the respondents would like to receive such information more frequently, provided that this could be done easily and quickly.  

Aivars Slokenbergs, Chairman of the LCD Management Board says: „Earlier such information could be obtained by visiting a SSIA branch office in person or by filling out SSIA online application form and requesting the information. Both alternatives are rather awkward for the clients: they are time-consuming, might involve travelling costs, and in case of online application, also costs for obtaining a digital signature that is required to sign the application, and which is not yet popular among private users in Latvia. It is also possible to request the information about second pillar pension system savings via several internet banks, however, there are some shortcomings – it is possible to get your account statement only once a year, and it can be issued four months after the end of the calendar year and it only reports the contributions made during the previous year.”  
 

Aivars Slokenbergs, Chairman of the LCD Management Board (from right), Mārtiņš Bičevskis, Chairman of the Association of Latvian Commercial Banks and Ojārs Skudra, Chairman of Management Board of  „NORVIK asset management company”.

A.Slokenbergs explains: „The issue of pensions hits the spotlight from time to time. At this moment it is back on the public agenda and this time – in the context of current the political environment and economic uncertainties the society is facing. A multi-tier pension system was set up in Latvia some years ago to at least partly enable people to take a better care of and monitor their savings towards retirement years. Yet, so far for individuals it has been rather difficult to effectively monitor their pension savings and take well-grounded decisions about the change of the asset manager or the scheme. Latvian Central Depository has a long-term experience in maintaining the individual accounts register in the second pillar pension scheme. Therefore we have designed a system that will support a much easier exchange of information and allow people to monitor their assets that will determine their financial situation in the future. ”

The information system developed by the Depository envisages that people will be able to apply for the information via their internet bank (provided that the internet bank offers such option to its clients) and individual pension system account statement (for the contributions made in second pension pillar) for any requested period will be sent to the registered users’ e-mail account within one minute.

Thus:

• information exchange and accessibility is much easier and quicker than any of the options available up to date;
• not knowing which investment management company is managing one’s pension savings will not be an obstacle to request the statement;
• account statements can be requested via user’s internet bank even when the asset manager is associated with another bank;
• information that will be sent to the individual is absolutely safe against unauthorized access by third parties, including bank that has been used to request the statement.

A. Slokenbergs adds: „Though application system is integrated into the internet bank, the bank itself will not be processing any information – statement will be sent directly to its client from an automated Latvian Central Depository system. Therefore banks will not get any information about their customers’ accounts and transactions in other financial institutions.” 

All leading Latvian commercial banks have been offered to introduce the service, and „NORVIK banka” was the first one to offer the new system to its internet bank users. Ojārs Skudra , Chairman of Management Board of the Bank’s subsidiary „NORVIK asset management company” is convinced that this service will be very much in demand and that also other commercial banks will be offering it. He believes that the availability of information about the assets accumulated in the second pillar pension system will bring two significant benefits: „First, the possibility to monitor your account status allows controlling whether your employer has paid the taxes for you and whether a part of these contributions have been diverted to the second pillar pension funds towards your retirement years, and, second, this is a possibility to control periodically whether your asset manager is doing its best to increase your capital. Having obtained such information, it is then up to you to decide what is the best solution for your pension funds in second pillar. I would also like to remind that you can change your asset manager once a year, and shift between different pension schemes offered by one particular asset manager twice a year.” 

Mārtiņš Bičevskis, Chairman of the Association of Latvian Commercial Banks, stresses: „Now that we have the new system in place there is a big and genuine hope that the government and parliament will see it as one more argument to restore the amount of the contributions to the second pillar pension system to the level that would bring us closer to a sustainable and stable pension system that can gain trusted of broader society.”

The management of the Depository believes that the growing number of people that are interested and aware of their savings will turn into a positive pressure on financial institutions, thus encouraging other banks to offer the new system to even more customers. Currently more than a half of Latvias’population is involved in the second pillar pension system and their total asset value exceeds 865 million lats.

About the Latvian Central Depository

Latvian Central Depository has the status of a national securities depository. It performs the functions of the central bank for securities, providing registrar, safe-custody and settlement services for all securities that are in public circulation in Latvia and also for th ose that are not listed on the exchange. In addition, the Latvian Central Depository provides other registrar services to its customers, e.g., the second pillar of Latvia’s pension system, shareholder registers for non-listed companies. Latvian Central Depository is a daughter company of NASDAQ OMX Riga. More: www.nasdaqbaltic.com.

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Anda Zvīgule
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anda.zvigule@nasdaqomx.com