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Returns at Lithuanian pension funds surge in 2014

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  • Kaunas, Lithuania

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Lithuania’s second and third-pillar pension funds posted strong returns in 2014, according to Bank of Lithuania, the central bank and pensions regulatory authority.

The annual nominal return for the 26 voluntary second-pillar funds averaged 7.78%, compared with an annual inflation rate of 0.1%, and well above the average 4.28% generated in 2013.

High-risk funds, which can invest up to 100% in equities, generated the best average return, of 9.73%, followed by low-risk funds (with up to 30% in shares) at 8.20%.

The medium-equity funds, the most popular vehicle, returned 7.95%.

Conservative funds, with no equity share, generated 4.02%, compared with 0.58% the previous year.

According to Audrius Šilgalis, senior specialist at Bank of Lithuania’s financial services and market analysis division, the low-equity funds benefited from a strong performance in the bond markets, and the high-risk funds from their investments in US equities.

Membership grew over the year by 3.5% to 1.16m, close to 80% of the workforce, while assets grew by 18.3% to €1.9bn. 

Asset growth was partly boosted by the high percentage of members who had earlier chosen to add an extra 1% of their wages to their second-pillar savings, matched by a further 1% of average annual earnings from the state.

The base contribution fell from 2.5% in 2013 to 2%.

In 2016-19, the additional worker contributions and state subsidy increased to 2%.

In the much smaller third pillar, the 10 funds returned 7.34% on average, compared with 6.42% in 2013.

Returns ranged from 9.32% for medium-risk funds to 8.24% for high-equity funds and 2.19% for conservative structures.

Membership increased by 16.6% to 39,993, and assets by 25.8% to €47.5m.

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