Pillar III – a way to raise an oral pension

As early as possible

According to Loreta Načajienė, Head of Luminor Investment Management, stage III can be called lazy investing, as the accumulation in it does not require active engagement – the distribution and management of investment is taken care of by professional fund managers.

« However, this method of investment is certainly not allocated to those who do not want or do not have the time to be actively interested in investing. Tier III is perfect for anyone who is looking for a simple, convenient and effective way to accumulate additional pension funds, » says L. Načajienė.

Due to the compound interest effect, the earlier the accumulation begins, the greater the amount can be accumulated. « It is best to start investing at a young age – for example, if a 25 -year -old young man starts investing in 100 euros per month, after 40 years, retired, the amount accumulated could be almost EUR 311,000 (total contributions – € 48,000, average annual return – 8 %), » says L. Načajienė.

« However, even if a person starts to accumulate at the age of 45, it still allows retirement to accumulate extra and use the return on investment. In this case, if the person pays the same $ 100 premium per month, the amount accumulated on retirement could be € 55,000

Attitude: According to G. Ilkytė, in the face of an aging society, it should be a priority of not only the state but also the population themselves. / Photo by Swedbank

More space

According to Swedbank, senior economist Greta Ilekytė, both II and III and III investing is enough to agree to participate and the resident’s income is automatically invested, each month, so the principle itself is very similar and passive. However, in Tier III, a resident has more space to make decisions, for example, you can choose the amount you want to accumulate, adjust or suspend payment of contributions, and if necessary to pick up some of the accumulated funds previously the term of the contract, the economist explains. « It should be emphasized that participation in Tier III is completely voluntary, there is no automatic inclusion, » she distinguishes.

However, the risks should also be noted. « The III risks are associated with an economic, geopolitical situation where, for example, a resident invests in stock pension funds, and stock prices fall.

According to her, pre -designed return on investment is very difficult, as the situation is largely dependent on geopolitical, economic situations, as well as the period of time:

If a 25 -year -old young man starts investing in a $ 100 per month in his 3rd pillar pension fund, after 40 years, on the day of retirement, the accumulated amount could reach nearly 311,000. euros.

Not yet popular

According to LB data, 2024 In the 2nd stage of pension, 1.43 million accumulated and III – 166 thousand. of the population. 2023 This figure was 118 thousand, so the number of participants in Pillar III increased by more than 40 percent last year, says L. Načajienė.

Compared to Western European countries, in Lithuania III is still not as popular as, for example, in the US or Scandinavia. « For several years in a row, the Netherlands and Denmark have been named as countries with the best pension system in the world. In these countries, residents themselves are actively taking care of their future and showing a high level of awareness.

In Lithuania, the most important part of pensions remains the classic current funding system, known as stage I and which pensions are funded by employees’ social security contributions. « In other words, when working and paying taxes, we have to pay pensions to our parents or grandparents. For higher pensions, we need to increase the number of employees in Lithuania, raise existing taxes on current employees or borrow. At present, the difference between former salary and pensions is less than 50 %.

« Understanding that society is aging is not a sustainable stage. The 2004 pension reform was held, unlike in some Western countries, in Lithuania, I do not have to accumulate in Lithuania.

« If you decide to accumulate in Tier II, it is not possible to leave and recover from it yet. According to LB data, II pension funds accumulate more than 9 billion euros. This is just less than a tenth of the country’s total domestic product (GDP). she.

Benefits: L. Načajienė recalls that due to the composite interest effect, the earlier the III pension pillar begins to accumulate, the greater the amount can be accumulated. / Photo by Luminor

Responsibility of the population

G. Iliekytė says to L. Načajienė: it is not very popular in the 3rd stage in Lithuania, but last year the number of participants was actually recorded last year. This may also be related to the fact that residents who have entered into contracts by 2024. By the end of the 19th century, he retained the possibility of a personal income tax (PIT) benefit from the contributions paid for the next ten years. Residents who have not concluded the contract will no longer be available to obtain such benefits, even if they decide to accumulate in Tier III.

According to G. Ilkytė, in the perfect world I would not need stages II and III at all. « As a working age, residents would accumulate funds for old age, invest, and retirement could use these savings. The reality is a bit different, and independently accumulate and invest funds for a large part of the population is still difficult.

« It is possible to hear stories when retired residents contribute to the state -paid pension only a few tens of euros. However, the current pensioners often accumulated only a small part of their working age in the 2nd pillar – up to 20 years, and earned a pension from the first stage of pension in 35-40 years, » explains the economist.

We will only approach the amount of pensions at the Western countries when we are able to align with the amount of independently accumulated, for example, with the Danes with a amount of almost 200 % of pension funds. from GDP.

She believes that ensuring the dignified pensions in the presence of aging society should not only be the priority of the state but also the population themselves: « We will only approach the amount of pensions at the Western countries when we can equate the amount of independently accumulated, for example, with the Danes with almost 200 % of GDP. »

Where do you invest?

In tier III, professional fund managers take care of the person’s funds to be invested as efficiently as possible. According to L. Načajienė, pension funds investments are diversified to maintain stability and ensure long -term return. The most commonly invested in long -term and stable asset classes such as bonds, promotions, promotions, bonds, private capital or real estate funds, resulting in a steady return over time. « In addition, the fund managers are constantly monitored by markets and make investment decisions to maximize the amount of returns for the participants, » she distinguishes.

« The biggest return historically comes from stock markets, so younger participants are often directed here and older ones to safer, less risky investments such as bonds, » explains L. Načajienė.  » It is recommended to choose mixed funds between the ages of 50 and 58, and are offered to focus on less risky pension funds for government and enterprise bonds, bond investment funds, deposits or other money market tools. « 

Guarantee: According to dr. A. Kabašinskas, contrary to the usual investment in shares or cryptocurrencies, is long -term and teaches discipline. In other words, these funds can only be recovered in the distant future and no one will take them from you. / Photo by KTU

Keep in mind the declarations

Professor of Kaunas University of Technology (KTU) dr. Audrius Kabašinskas believes that in fact, the third pillar of pensions should not be called lazy investing: « There are more activities here: it is necessary to declare income every year to recover part of the contributions and to control the risk of investing. »

« In addition, you need to understand what product has been offered to you. And the II stage is created and thus transformed in 2019 so that the employee should not worry about anything … The only thing he needed to do is to choose the fund manager according to his needs. A. Kabašinskas.

He emphasizes that the 3rd stage does not have the age limits, but it must be realized that the investment here is already after the person pays income and other taxes, and then, if they still have funds for permanent contributions, and it is worth thinking about pillar III.

« In addition, together with pillar III accumulation, companies often offer insurance services – cumulative insurance, so we need to understand the differences from other forms of investment, » the KTU professor notes.

« Here are the same rules as in other forms of investment: the earlier you start, the more you accumulate, the more reinvestment the effect will be, but even when you start to accumulate later, you will still benefit, » he says.

Compared to stage II, approximately 10 times less persons accumulate in Tier III and the accumulated property is about 20 times smaller.

Dr. A. Kabašinskas is convinced that it is no matter whether the PIT benefit is or not, stage III is a good way to diversify his investment. « In addition, unlike usual investment in stock or cryptocurrency, this form of investment is long -term and teaches discipline. In other words, these funds can only be recovered in the distant future (with certain exceptions) and no one will take them.