Finance coach: choosing the right second-pillar pension plan can shift savings by 30–40%
Finance coach Egija Veisa explains how to choose a suitable second-pillar pension plan and why she opposes early withdrawal of accumulated pension funds. She notes that roughly a third of Latvians still hold plans unsuited to their age.
Finance coach Egija Veisa says in a recent interview that it is never too early to think about retirement and ways to boost future pension income. Latvia operates a three-pillar pension system, each offering different ways to influence one's eventual savings.
First pillar depends on the employer
The first pension pillar is mainly shaped by how long and how much a person contributes, so it matters whether an employer pays taxes honestly rather than operating in the so-called "grey zone".
Second pillar is a matter of choice
The second pillar offers more direct influence, since individuals can choose their own plan and fund manager. Veisa recommends using the manapensija.lv website to compare plans, noting it now also includes more detailed information about the third pillar. When choosing a plan, age should be a key factor — younger people are generally better suited to more dynamic plans with higher equity exposure and greater potential returns. Comparing management fees and historical plan performance is also important. According to Veisa, about 30–35% of Latvia's population is still enrolled in plans that don't match their age.
The coach firmly opposed the idea of allowing early withdrawals from second-pillar pension savings, an initiative previously discussed in parliament. She pointed to experience from Lithuania and Estonia, where withdrawn funds were often spent rather than reinvested, ultimately harming people's long-term welfare. She added that financial literacy among Latvia's population is not yet high enough for such a measure to have a positive effect.
Third pillar is voluntary
Contributions to the third pension pillar are voluntary, and there is no single formula for the ideal monthly amount — each person should calculate their own target by subtracting the projected state pension share from their desired retirement income and working backward to determine the needed third-pillar contribution.
Veisa herself has been investing for six years toward full financial independence, meaning an investment portfolio that covers daily expenses without the need for salaried work. To reach this goal, she and her family invest 30% of their income while trying to maintain a healthy balance between present needs and future goals.
