Sodra expects up to 70% of participants to leave private pension funds
A representative of Lithuania's state Social Insurance Fund, Sodra, said up to 70% of second-pillar pension participants could withdraw their savings over two years. About 52% had already left in the first nine months of this year.
Up to 70% of participants in Lithuania's second-pillar pension system could withdraw their savings from private funds over a two-year period, a representative of the state Social Insurance Fund, Sodra, told the parliament's Budget and Finance Committee on Wednesday. The second pillar consists of retirement savings held in private funds. It was liberalised this year, opening a two-year window in which participants may take their money out.
Daiva Gerulytė, head of Sodra's Pension Annuity Division, said next year's forecasts already assume a total withdrawal rate of at least 70% of pension accumulation.
How many have left
In the first nine months of the year, about 52% of participants, or 749,000 people, left the system, while roughly 730,000 continued saving. Violeta Latvienė, Sodra's deputy director, told the committee that 41,000 people who had previously withdrawn had returned to the pension system this year. Before the liberalisation, around 1.45 million people saved in second-pillar funds, with combined assets of approximately 10.6 billion euros.
Concerns over the annuity fund
Committee Chairman Algirdas Sysas, a Social Democrat, asked whether the Pension Annuity Fund needed restructuring as contributions declined. He warned that the fund could be left with relatively few participants and high costs of administering annuities, and asked whether revenue and assets would keep shrinking while costs rose.
Gerulytė replied that the share of contributions used to administer annuities could be cut in future if revenue fell. For now, the fund is supported by investment income and money transferred back to Sodra from the second pillar. She said assets cover 135% of liabilities, meaning 35% more assets than liabilities, which allows the fund to be expected to stay financially sustainable for a sufficiently long period.
Sysas also questioned the reliability of the forecasts, noting that withdrawals last year were twice as high as Sodra had predicted. He called forecasting a very dangerous thing.
