Pension And Mutual Funds In Lithuania. Seminar 09 11 25

MUTUAL AND PENSION FUNDS: LITHUANIAN CASE Taurimas Valys PhD candidate Vilnius university International School of Law and Business Vilnius 26.11. 2009

AGENDA  MUTUAL

FUNDS (UNDER UCITS REGULATION / HARMONIZED AND SPECIAL FUNDS);  PENSION FUNDS (II PILLAR PENSION FUNDS VERSUS SOCIAL SECURITY SYSTEM "ALTERNATIVES"; III PILLAR AND OTHER VOLUNTARY PENSION FUNDS)

Fund types

Investor’s risks  Expenses

do not depend on rate of return.  Investor does not have any control over investments.  Investor cannot control assets market value in real time.

Mutual funds: Harmonized Vs. Special  Publicity  Subscription  Risk

level  Diversification requirements  Liquidity level

Baltic market        

Equity funds (106) Fixed Income funds (31) Fund of funds (17) Balanced funds (10) Money Market funds (6) Real Estate funds (3) Liquidity fund (3) Alternative funds (2)

Management companies (Licensed in Lithuania)

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

Danske Capital investicijų valdymas DnB NORD investicijų valdymas Finasta Asset Management Investicijų portfelių valdymas JT investicijų valdymas (licence revoked) Lords LB Asset Management MP Pension Funds Baltic Parex investicijų valdymas Prudentis SEB Investicijų valdymas Sindicatum Capital International SNORAS Asset Management Swedbank investicijų valdymas Ūkio banko investicijų valdymas

Legislation

        

Law on Securities Law on Companies Law on Markets in Financial Instruments Law on Financial Institutions Law on Collective Investment Undertakings Law on the Privatization of State-Owned and Municipal Property Law on Insurance of Deposits and Liabilities to Investors Law on the Accumulation of Pensions Law on the Supplementary Voluntary Accumulation of Pensions

Achievements: Participants 





Performance of participants number  31 12 2003 – 440 000  31 12 2004 – 556 000  31 12 2005 – 685 000  31 12 2006 – 784 000  31 12 2007 – 880 000  31 12 2008 - 957 000 Distribution by gender  51 % - Male, 49 % - Female Distribution by age  Up to 30 years - 30 %, 30-50 years - 61 %, above 50 years - 9 %

Achievements: Total net Assets in thousands of millions of LTL     



31 31 31 31 31

12 12 12 12 12

2004 2005 2006 2007 2008

– – – – -

127,4 406,1 904,9 1688,2 2223,8

(Exchange rate since February 2002: 1 EUR – 3,4528 LTL)

Transfer rate which comes to pension funds from The State Social Insurance Fund Board under the Ministry of Social Security and Labor

 2009

I half. 3 %   2009 II half. 2 %    2010 m. 2 %   2011 m. 5,5 %   2012 – 2014 m. 6 % (?)  2015 m. and later 5,5 %

Achievements: Service providers 1. 2. 3. 4. 5. 6. 7. 8. 9.

Swedbank ( former Hansa, Swedish Banking Group )– 4 funds Finasta ( Local Financial Services Group) – 4 funds and 4 acquired from PZU Lietuva MP Pension Funds Baltic (Icelandic Financial Group)– 3 funds DnB Nord (Scandinavian – German Banking group) – 3 funds Parex ( Regional Financial group with HQ in Latvia)– 2 funds Danske Capital ( Danish Banking Group)– 3 funds SEB ( Swedish Banking Group)– 3 funds Aviva ( UK Insurance Group)– 3 funds Ergo ( German Insurance Group)– 2 funds

Achievements: Service providers (cont.)  Market

is heavily dominated by the subsidiaries of Scandinavian Banking groups – it covers more 75 percent of total market  Small market players loosing market share due to the shortage of efficient non banking distribution channels

World Bank I part - timing 

Timing was right due to the main demographical trends



System will mature around 2050, when 80% of insured will be entitled to receive pensions from two

World Bank II part – model 

 

Efficiency of model was proved by results as more than 70 of working population joined the system System is very efficient in terms of institutional structure But system is quite costly from the participant point of view due the total assets accumulated yet

Conclusion  The

main problem is financing of II pillar contributions  Fiscal policies sustainability importance  Position of European Commission should be clarified

Q&A

 Taurimas

Valys ([email protected])