State funded pension schemes in the Baltic States: Assets and return analysis

The Baltic States have a three-tier pension system. Pillar II is the state funded pension scheme in which contributions are made automatically from an employee’s gross salary as part of social contributions. The contributions to Pillar II state funded pension schemes may be invested in several pension plans with different risk ratios of which three types are the most common: active, balanced and conservative ones. The accumulation of funds and consequently a partial amount of an old-age pension depends on the chosen pension plan and the manager of funds. The research aim is to assess the operation efficiency of the state funded pension schemes in the Baltic States. The research mainly employs and provides the analysis on the statistical data on the value and return of assets and number of Pillar II scheme participants. Theoretical discussion is built upon the use of scientific publications by means of monographic descriptive method, correlation and regression analyses as well as the methods of analysis and synthesis. In Latvia, 25.62% on average of all state funded pension plans participants have chosen conservative strategy, while only 8.36% on average have chosen this strategy in Lithuania. In Estonia (75.49%) and Lithuania (69.13%), the majority of assets are accumulated in the balanced strategy pension plans. The research results show that pension plans have positive return in long-term; though, sharp fluctuations and negative return might be demonstrated in short-term. Both in Lithuania and Latvia exists a negative correlation between Pillar II pension schemes and inflation, i.e. the return of a pension scheme decreases with the increase of inflation meaning that inflation alongside with other economic and political factors might be considered as a factor affecting the return of pension schemes.