Latvian residents lack information about the formation of pension capital. On top of that, their trust in the system is very low, as concluded in SEB Bank’s latest survey.
Survey data shows that Latvian residents’ readiness to start making pension savings is currently the lowest among Baltic States. Insufficient income level is the reason why residents cannot afford to make private savings.
«Although in 2016 the proportion of residents who make savings for retirement had increased to 35%, and the general level of confidence for the future had increased, the level of residents’ knowledge about the pension system remains low. More than 30% of working people are subjected to poverty risk because their current income cannot secure them appropriate pension size,» SEB Life Insurance and Pension Savings manager Kristine Lomanovska comments on the survey results.
95% of respondents admit now knowing what amount is paid to their 2nd level pension every month and what their capital size is. Every fourth respondents does not know their 2nd level capital manager and 60% have no idea which pension plan they have.
It is concluded in the survey that the current situation has formed as a result of information unavailability: «Working people believe savings make up only 5-7% of their future pension, even though in reality it is 10-20%. Finally, 62% do not expect to receive the full pension amount from their 2nd level pension plan,» SEB Bank comments on survey data.
«The majority of working people do not consider 2nd level pension savings as their personal capital. This is because information as to what happens to their deposits is not easily available to them. Residents want to follow the growth of their savings using internet banking account, but such a solution is not available in Latvia at the moment,» Lomanovska explains.
On the other hand, in Lithuania and Estonia, where data on savings are more accessible, the level of trust is higher: «45% in Lithuania and 58% in Estonia believe 2nd level savings increase their pension capital,» adds SEB Life Insurance manager.
Compared with 2015, the proportion of residents who make private savings had increased by ten percentage points last year. Nevertheless, 65% of respondents do not make savings, largely because they cannot afford making them. 45% of respondents rely on alternative income, the survey data shows.
Commenting on the survey data, Lomanovska also mentions that most often residents say they plan to continue working after reaching pension age. «In addition, expectations for employers to become involved in pension saving process are increasing – 49% of working people expect employers to assist with the formation of their pension. Currently, payment tot private pension funds are performed only for 6% of employees.»
Analysing survey results, SEB Bank calculated Baltic residents’ pension preparedness. «Latvia’s overall index turned out the lowest among Baltic States – only 3.4 points out of 10. Lithuania’s index is slightly better – 3.5 points. Estonia’s index is the highest among Baltic States – 3.8 points,» Lomanovska notes.