Banks scramble for pension positions

TALLINN - Next year second pillar pension funds in Estonia will receive a total of more than two billion kroons (128.2 million euros) in new payments and hence in the next six weeks the banks will strive to get as much of this amount as possible, reports Postimees. According to the current regulations, people can take their pension fund shares to a new fund, or start saving up for the pension in a new fund just once a year.
In order for the fund change to come in force in January, the application has to be submitted by the end of October at the latest. Banks have already launched ad campaigns to get as many future pensioners as possible to invest in their future pension in their fund.

Swedbank Investment Funds board chairwoman Agnes Makk noted that the moment of truth for pension funds arrives on Oct. 31, when the difference between joiners and leavers becomes clear. “The pension is an important product, the pension fund is like a housing loan, both help to tie a person to the bank for a long time, and thus there is a fierce fight over clients,” said Makk. Last year, around 10 percent of those who had joined the pension fund system changed their fund and together with them, around a billion kroons’ worth of pension fund assets moved, official statistics show. Last year, Swedbank’s second pillar funds were the ones that lost a lot of clients, yet Swedbank kept the highest second pillar market share, 48 percent.

Last year the government froze its share of payments to the pension funds in order to preserve the budget balance. Next year, the state will restore half of its payments; instead of the earlier 4 percent it will pay 2 percent and people themselves pay 1 percent instead of the earlier 2 percent of wages into the pension fund. Also, about a third of people have chosen to voluntarily pay 2 percent of their gross wages to the pension funds.

The State Treasury has calculated that next year, the state will pay approximately 1.2 billion kroons to pension pillars; when the contribution of people is added, more than 2 billion kroons will be paid in. The finance ministry is preparing a law amendment that would allow changing one’s pension fund more frequently than once a year in the future.
SEB Varahaldus board member Sven Kunsing said that the speed of post-crisis recovery has slowed down and the outlook for the investment world is not as rosy as a year ago, however. “The majority of pension fund governors have reduced the risk level of their portfolios. I dare to think that in the future clients don’t have to fear considerable setbacks in connection with materialized credit risks, which left its mark on pension funds in 2008 and 2009,” said Kunsing.