Painful personal losses have not been avoided during two months of the pension reform

Most often, people having taken decision to return to Sodra say they had not evaluated the fact that they had lost opportunity to secure heredity of the accumulated funds and got into a kind of one-way movement zone, i.e. in other words, although they want to get back with an amount they previously had, it is not possible to do so.

Šarūnas Ruzgys, the President of LIPFA says that, taking into account the situation, representatives of companies governing the 2nd pillar pension funds pay great attention to finding out the personal situation of the client and discussing all important changes to the pension system.

“We respect any decision of our customers, but we cannot ignore the fact that number of customers who want to change their mind naturally grows by each month. So far, a part of those who have changed their minds is not significant or dominant; however, for any person his personal mistake in using savings can be financially very painful. Therefore, we would like a decision to be fully thought-out, weighed against personal situation and not taken hastily. It is very important to evaluate all nuances and to understand how the system works. Just nine times to measure and only the tenth one to cut, so you shouldn’t regret it later,” Š. Ruzgys says.

During two months of the pension accumulation reform, desire to return to Sodra was reported by 11.8 thousand 2nd pillar participants. Among the customers who wanted to change their mind, the highest amount transferred to Sodra reaches tens of thousands of euro – such amount of the savings saved in the 2nd pillar for future pension was transferred to Sodra.

A resident who returns with his 2nd pillar savings to Sodra will receive virtual points for his future pension. In addition, every resident who has ceased accumulation and returns to Sodra can start to re-accumulate at any time, but this will have to start from scratch.

Unfortunately, as S. Ruzgys notes, it is still often confused about what means to “stop accumulating” and “return to Sodra”.

In the first case, no new contributions are deducted from the salary to the pension fund but the amount have been accumulated so far remains in the fund and continues to be invested. Meanwhile, the second option means that accumulation is not only discontinued but the accumulated amount is returned to Sodra, in return to the state-funded pension restoration during the accumulation period.

“We advise our consultants not only to ask a client, but also to reconsider their exact choice, whether they evaluated all possible consequences. Legislation regulates the whole process so that the decision made cannot be withdrawn or cancelled – that’s why clicking a button or putting a check mark determines everything. The worst thing is that we cannot help a customer who has done this, even by understanding his arguments and willingness to make things different. We advise our people to ask, consult, fully evaluate accumulation possibilities before making their decision,” says the Head of LIPFA.

About 1.3 million or 90 percent of all employed people of Lithuania participate in the 2nd pillar pension funds. At the end of February, the accumulated assets in the 2^nd pillar of pension funds amounted to € 3.306 billion and in the first few months this year it has grown by more than 6%.