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Tadas Gudaitis, director of the Lithuanian Pension and Investment Fund Association (LIPFA), said that the value of assets of people who accumulate a pension in the second pillar increased by 5.2 percent last year.
According to the preliminary assessment of the Lithuanian Pension and Investment Fund Association (LIPFA), level II pension funds of the younger age groups earned more last year, investing more in company shares according to the strategy the cycle of life.
“After the last global of 2008, more than a decade after the economic crisis, the world faced a fundamentally new threat last year: the virus. There was really a lot of uncertainty and anxiety, because it affected the economies of the countries very strongly. As a result, financial markets suffered a hole in the spring, but rebounded fairly quickly.
By the end of 2020, residents accumulating funds for retirement had accumulated more funds in their (pension) accounts than at the beginning of the pandemic. For the rest of the year, Lithuanian pension funds not only made losses, they also gained; this is a great result of a pandemic year, ”says LIPFA Director T. Gudaitis.
According to him, the business sectors most pressured by the virus are still in a difficult situation, but the regrouping of investments, focusing on the most promising activities, as well as the growing hopes of mass vaccination support the optimism of the market.
The absolute majority of accumulators earned more than 5 percent.
Lithuanian pension funds, which switched to a life cycle fund strategy since early 2019, redistributed investments. The weighted average return of riskier funds that invest more in stocks, whose participants are residents of younger age groups, surpassed 5% last year.
The weighted average return on funds of the youngest participants aged 19-25 was 5.07% last year, and the investments of the youth aged 26-32 reached 5.52%. Return.
The highest result was achieved in the group of pension funds of participants aged 33 to 39; in this case, the weighted average annual return was 5.79%. Investments by pension fund clients aged between 40 and 46, which grew by 5.76% last year, did not lag behind the best result either.
5 percent Pension funds that connect people ages 47 to 53 also crossed the breakeven point, with a weighted average annual return of 5.33% last year.
As the official retirement age approaches, investments become more conservative and, therefore, their fluctuations are less. 4.57 percent Last year, the weighted average return of pension funds that invest savings between the ages of 54 and 60 increased. Respectively, the savings of the oldest accumulators aged 61 to 67 years increased on average by 2.98% last year, and in asset preservation funds by 2.9%.
Andrius Adomkus, director of Luminor’s pension asset management group, noted that the shares of pension fund managers fluctuated in March last year and fell.
“However, the central bank’s stimulus programs, as well as the government’s responses, have allowed volatility to recover. At the end of the year, optimism came from the appearance of vaccines. Last year, in many states, the average annual return was even slightly higher than the 20-year average.
Last year, the highest positive return was recorded by the IT sector, which was not affected by the pandemic, as well as e-commerce companies or communication platforms Facebook and Zoom. This year was the most favorable for them. The segments of airlines, commercial real estate and offices have been the most affected, “said the specialist.
From the start of the activity: growth of up to a quarter
According to LIPFA data, since the beginning of its establishment in early 2019, the weighted average return of Lithuanian pension funds has been 26.3%. T. Gudaitis says that the biggest influence on this was the redistribution of investment risk by age group.
“We have followed the same trend for the past two years. Funds in the younger age groups, which are particularly susceptible to market fluctuations, are growing the fastest, increasing the weighted average return on their investments from 20 % to almost 30%. The most conservative pension funds also won. When evaluating the life cycle fund strategy, which was also tested in the COVID-19 pandemic, it is obvious that it works in favor of the participants of the pension funds, ”says T. Gudaitis.
At the end of 2020, the assets of the pension funds reached 4,496 million. and it was the largest during the entire period of operation of the second-pillar pension funds in Lithuania. The biggest savings are held by pension fund participants aged 40-46 and 47-53, whose funds manage about $ 1 billion each. savings for future retirees.
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