New private pension fund established in Latvia

RIGA (BNS) - Latvijas Unibanka and a major insurance company have founded a private pension fund. Latvijas Unibanka will hold 81 percent, Maras Banka 9 percent and Rigas Fenikss - Dzivibas Apdrosinasana 10 percent of capital shares in the newly-established pension fund.

Unipensija has a registered capital of 400,000 lats ($677,966). Latvijas Unibanka said documents about registration of Unipensija with the state companies register will be submitted next week.

The system opens the possibility for companies and private persons to make cash payments according to a freely chosen pension plan in the pension fund and accumulate their money in parallel with the state-guaranteed pension capital created from the social tax contributions.

The system of pension funds has received support from the government in that the contributions to the pension fund are partially released from the income tax.

"Considering the pace of the economic growth, Latvijas Unibanka predicts that the first users of pension funds will be the companies, who by making contributions to the pensions of their employees will not only enjoy the tax relief but also gain a closer bond with their workforce," the bank said.

It is expected that in the first operating year of Unipensija 15 to 20 Latvian companies may become its members.

Savings in the pension funds are characterized by higher yield, and different to the government-guaranteed pension the shareholder' s pension capital can be used.

It is planned that a growing number of private persons will use the opportunity to become shareholders of the pension fund.

In terms of private persons willing to establish their own pension capital via the pension fund Unipensija, Latvijas Unibanka will provide this service at its branches and sub-branches.

Law will ensure the protection of the pension fund's shareholders. The participant will own all cash resources paid into the pension fund, and the fund will only organise the management of the shareholders' assets.

In compliance with the law, supervision of the pension fund will be vested with the Insurance Supervisory Inspectorate; the law also stipulates the investment of the pension fund assets - at least 85 per cent of resources should be invested in Latvia.

Given that the pension and pooled investment funds administer assets, whose basic structure is made of investments with a term of 10-40 years, when placing them, long-term resources will be re-invested in the state economy.

Consequently, the upgrading of the pension fund plan will also facilitate the development of the long-term state capital market.

Shares in Latvijas Unibanka are quoted on the official list of the Riga Stock Exchange.