Latvia’s 23 mandatory second-pillar pension funds returned an average 5.24% in 2014, up from 2.29% in 2013, according to data from the Association of Commercial Banks of Latvia (LKA).

The best annual returns were generated by higher-risk, equity-weighted plans (5.52%), followed by balanced funds (5.28%) and conservative, bond-weighted ones (4.57%).

For the higher-risk funds, the main asset allocation shifts included increasing the share of equity and equity funds from 27% to 32% of the portfolio, while reducing the bond and bond fund share from 57% to 54%.

The conservative funds, meanwhile, raised the overall bond and bond fund share from 82% to 85%.

By geographical distribution, Latvian investments accounted for 42% of second-pillar investment, followed by Eastern Europe at 17%.

Assets increased over the year by €328m to €2.1bn, of which €92m were investment gains, while membership grew by 2% to 1.25m.

Asset growth should accelerate in 2015 as contribution rates – which remained unchanged, at 4% out of a total 20% in 2013-14 – rise to 5%.

The five open and one closed third-pillar funds increased their average return from 2.23% to 5.33%, with the riskier funds generating 6.62% and the balanced ones 4.91%.

Assets increased by €45.1m to €280.7m, of which €9.4m were investment gains, and membership by 17% to 235,000.

The total level of contributions soared by a historic high of 19% to €51.1m.

The rising interest in the third pillar came primarily from individual account members, whose contribution levels grew by 26% in 2014, while those from employers fell by 4%.

The LKA noted that public sector employers, in particular, have limited scope to contribute to their workers’ pension plans.

Have a look at Rachel Fixsen’s article on one Latvian pension fund’s search for size and scale in the January issue of IPE magazine