Lithuania’s voluntary second-pillar pension funds have almost equalled last year’s investment returns during the first six months of 2014, according to figures from the Bank of Lithuania (BoL), the country’s pensions regulator.

All 26 funds made positive returns, with an overall average of 4.1% for the period, compared with an average 4.3% for calendar 2013.

The highest average return – 4.7% – came from the riskiest funds, investing between 70% and 100% in equities.

Thereafter, average returns decreased in line with risk.

Medium equity exposure funds (30-60%) generated 4.41%, and low exposure funds (up to 30%) 4.12%.

Conservative bond funds (no equities) returned only 2.16%.

The figures mirror the funds’ average annual returns over the past three years, with an average 6.12%, 6%, 5.85% and 3.31%, respectively, for the four risk categories.

Audrius Šilgalis, senior specialist at the BoL’s financial services and markets analysis division, said: “While the first half of 2014 was erratic for investors, nearly all pension funds achieved a positive return on investment in the first half-year and increased the assets of participants.”

According to the BoL, two-thirds of second-pillar pension fund portfolios – approximately LTL4bn (€1.1bn) – was invested in euro-denominated assets, while 15.9% of portfolios were invested in litas.

Šilgalis said: “Most of the assets of pension funds and collective investment undertakings have been invested in euros, hence the adoption of the euro in Lithuania [on 1 January 2015] is likely to significantly reduce the currency conversion and transaction costs incurred by these entities, which provides the basis for fund participants to seek higher returns.”

Meanwhile, the rate of increase in second-pillar assets also outstripped last year’s exceptional rate of growth, climbing by LTL496.41m over the period, to reach LTL5.94bn at end-June.

Around 60% of the increase in fund assets came from contributions, with the rest from investment performance.

Membership was also up, though at a slower pace than last year, rising by 17,301 (1.55%) to 1.13m.

Last year, changes were introduced in the second-pillar contribution system.

Participants had to choose whether to continue paying the standard contribution of 2% of salary, save the maximum amount allowed or stop making contributions.

As from 2014, those who have opted to save the maximum now pay an additional 1% into their pension fund, while the state adds a subsidy of 1% of average monthly earnings.

From 2016, the additional contributions will rise to 2% of salary, while the state subsidy will also rise to 2%.

From 2020, the standard contribution rate will rise to 3.5% of salary.

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