2nd pillar pension funds

Did you know that:

  • the average state social insurance (SODRA) pension in Lithuania for those who contributed for the required period of time as of October 2018 was just 337.48 euros;
  • diverse studies have shown that maintaining one’s pre-retirement quality of life in old age requires having retirement income that is 60 to 85 per cent of one’s pre-retirement income;
  • the size of pensions paid by SODRA depends on the ratio of employed persons to pensioners as well as on the economic situation, so currently employed people’s influence on their future pension may be quite limited. The state, seeking to enable people in the country to save more for retirement, starting in 2019 is implementing a 2nd pillar pension fund reform which encourages more people in Lithuania to engage in accumulating in these funds;

To increase retirement income to 80 per cent of one’s prior income, additional accumulation in 2nd and 3rd pillar pension funds is recommended.

Accumulation in the 2nd pillar as of 2019

A reform of pension accumulation in 2nd pillar pension funds takes effect in Lithuania from 2019.

Following changes to the taxes paid by the employer and employees, in most cases (depending on one’s income) continuing to accumulate in a 2nd pillar pension fund will be financially beneficial. Due to the changes in the tax system, when continuing to accumulate a person’s net wage will either increase or remain the same, even if maximal instead of minimal accumulation is chosen.

Thus people who are employed will be able to allocate more money to accumulation in pension funds and so make arrangements for their future.

As of 2019, accumulating in 2nd pillar pension funds has become even easier. Accumulation takes place in life-cycle funds, which change investment risk themselves on the basis of participants’ age, so people only have to choose a pension fund once. Thus saving for retirement takes place in the funds that are best suited to participants’ age and the time remaining until they retire.

INVL has offered accumulation in life-cycle 2nd pillar pension funds since 2 January 2019.

A total of seven INVL life-cycle pension accumulation funds have been established, with names that reflect participants’ dates of birth: INVL Pension 1954–1960, INVL Pension 1961–1967, INVL Pension 1968–1974, INVL Pension 1975–1981, INVL Pension 1982–1988, INVL Pension 1989–1995, INVL Pension 1996–2002, and the INVL Pension Asset Preservation Fund intended for the pension savings of those who have reached retirement age. People who wish to change the pension fund assigned to them based on their age can do so by submitting a request to the pension accumulation company.

INVL’s life-cycle funds will invest in equities until participants reach age 48. During this period, investments will go to shares and other riskier asset classes such as real estate or other alternative assets. Although the value of shares is more volatile, over the long term they make it possible to earn more. When 17 years are left until retirement, the life-cycle funds will start to reduce the share of investments in equities and increase the bond share. The older participants are, the more investments will be allocated to the bond asset class, which is less risky and permits reducing fluctuations in the value of accumulated assets.

The management fee for accumulating in life-cycle funds will be gradually reduced. In 2019 it will be 0.8 per cent and in 2020 it will be 0.65 per cent, until as of 2021 it reaches an annual asset management fee of 0.5 per cent. For the asset preservation fund, meanwhile, the management fee will be just 0.2 per cent.

Key changes

  • The formula for 2nd pillar pension accumulation in pension funds is changing. As of 2023, all 2nd pillar participants will accumulate according to the formula “3+1.5%” (a contribution by the participant of 3 per cent of their gross wage plus a contribution by the state of 1.5 per cent of the average wage in the country the year before last).
  • In 2019, the state’s incentive contribution for maximal accumulation will be 16.41 euros per month. Those who until now accumulated maximally will move to the new formula as of 2019 automatically, while those who accumulated minimally will in 2019 accumulate according to the formula “1.8+0.3 per cent” (a participant contribution of 1.8 per cent of one’s gross wage plus a state contribution of 0.3 per cent of the average wage in the country the year before last) and then their contributions will increase gradually, by 0.3 percentage points each year, until their accumulation formula reaches “3+1.5 per cent”:
Year Graduated accumulation formula
2019 1.8 + 0.3
2020 2.1 + 0.6
2021 2.4 + 0.9
2022 2.7 + 1.2
2023 3 + 1.5

Those accumulating minimally can also move to maximal accumulation in 2019. To do so, they must submit a request to the pension accumulation accompany by 31 July 2019. The path one chooses will also determine the size of the state’s contribution to the pension fund.

  • The state social insurance pension will no longer be reduced when accumulating in 2nd pillar funds as of 2019.
  • 2nd pillar pension funds will operate on a life-cycle basis. Lithuania’s pension accumulation companies must establish life-cycle funds by 20 December 2018: pensions will accumulate in 7 funds which are divided up according to participants’ year of birth and themselves gradually change their level of risk, and also 1 so-called “payout” fund in which people who have already retired will hold their accumulated assets.
  • Life-cycle pension funds will themselves change their level of risk in accord with participants’ age, so people will not have to worry about that. All those who until now accumulated in the 2nd pillar, unless they choose otherwise, will accumulate in the pension fund that is most appropriate for them based on their age.
  • The management fee for pension funds will gradually shrink by half: as of 2021 it will fall by as much as half to just 0.5 per cent, and thus participants will accumulate more.
  • Accumulation “holidays” will be allowed, at various moments, the total of which over the entire period of accumulation can be up to 1 year.
  • Depending on the amount accumulated in a fund and the manner of disbursement you choose upon retiring, some or all of the accumulated assets may be inheritable, and as of 2020 annuity payments services will be provided by SODRA.

People who until now have accumulated in a pension fund but are considering suspending or discontinuing accumulation, will be able to do so from the start of 2019 until 30 June that year. They will have two choices, regarding which they will also have to contact their pension accumulation company between 1 January and 30 June 2019: to leave the accumulated money in the pension fund so that it continue to be invested until the retirement age, or return it to SODRA, where it will be recalculated into the points accumulating there. But as to whether doing so is worthwhile and whether other alternatives in the market are sufficient to save additionally for retirement, we suggest consulting a financial advisor.

Key changes for those who did not accumulate in the 2nd pillar prior to 2019

All employed persons up to age 40 will be included in 2nd pillar pension accumulation. They will be assigned one of the country’s five pension accumulation companies randomly and will be notified about that by SODRA. If the assigned company is suitable for them, they will start accumulating there from mid 2019.

Those who wish can also choose another company, in which case they will need to notify the newly chosen pension accumulation company by 30 June 2019. You can also make an agreement with the company and start accumulating for retirement without waiting for the middle of the year.

It is also possible to decline to save additionally for retirement. To do so you must notify SODRA by 30 June 2019. Those who decline accumulation will be included again in three years, for a total of three times.

Read more about the 2019 reform here.

Accumulation in the 2nd pillar before 2019

Until 2019, accumulation in 2nd pillar pension funds could be maximal or minimal, and some people had halted accumulation in 2013.

Those accumulating maximally had pension contributions from three sources: a contribution from the taxes paid to SODRA, a supplementary contribution from the wage of the person accumulating, and the state’s incentive contribution, the size of which was based on the average wage the year before last. This form of accumulation was also called 2 + 2 + 2. People who began accumulating in 2nd pillar pension funds after 2013 did so maximally.

The contributions to a 2nd pillar pension fund of a participant who was accumulating minimally were transferred only from the taxes paid to SODRA. This form of accumulation was also called 2 + 0 + 0. It was also possible to halt accumulation, with new contributions no longer transferred to the pension accumulation account, though the previously accumulated amount was left in the 2nd pillar pension funds and further invested.

Benefits of 2nd pillar pension accumulation

  • Investment in the future: At retirement, you’ll get pension income from two sources – the State Social Insurance Fund (SODRA) and the 2nd pillar pension fund.
  • Convenience: You don’t have to worry about transferring money to your pension fund account, since SODRA will take care of that. Moreover, the money in your pension fund account will be invested during the whole period of accumulation, even if you stop making contributions (if you lose your job, get sick or for some other reason). When you again start working and receiving insured income, the SODRA contributions will once more be transferred to your 2nd pillar pension fund.
  • It’s yours: Depending on the amount accumulated and the manner of disbursement you choose upon retiring, some or all of the accumulated assets may be inheritable.
  • The state contributes too: Starting 1 January 2019, for one parent in a household who is receiving a childcare allowance and raising a child under 3, a pension fund contribution equal to 1.5 per cent of the average wage in the country the year before last will be transferred from the state budget. Pension contributions are made for each child under 3.

How to withdraw money from a 2nd pillar pension fund

  • You can withdraw the assets accumulated in a pension fund when you reach the pension age established by law or acquire the right to an early pension.
  • Pension disbursement:
    • Until 2020, pensions can be paid out in a one-time lump sum, in periodic instalments, or by acquiring a pension annuity from a life insurance company.
    • Based on the currently valid table for base pension annuity size, which follows rules established by the Bank of Lithuania, there is an obligation to acquire a pension annuity for a man of pension age (63 years and 10 months) when the accumulated sum is 18,355 euros, and for a woman of pension age (62 years and 8 months) when sum is 18,969 euros.
    • After 2020, new rules for pension disbursement will take effect in the country, where depending on the amount accumulated and the chosen disbursement method, it will be possible to choose a one-time lump sum pay-out or either a standard or a deferred annuity, the payer of which in both cases will be SODRA. Depending on the amount accumulated in a 2nd pillar pension fund, these forms of disbursement will be applicable:
      • If less than 3,000 euros is accumulated, a lump-sum payout shall be made.
      • If 3,000 to 10,000 euros is accumulated, payouts shall be made in periodic instalments until no money is left.
      • If 10,000 to 60,000 euros is accumulated, a pension annuity shall be purchased and payments shall be made until death. Two types of annuities shall be available:
        • A standard annuity (pension payments starting immediately on purchase of the annuity and continuing for life, paid by SODRA in addition to the age-old pension paid by the state);
        • A deferred annuity (payments from the time of retirement until age 85 paid out of the private pension fund, for that allocating 85–90 per cent of the amount accumulated in the fund and with that amount being inheritable; and payments from the age of 85 paid by SODRA, for that purpose allocating 10–15 per cent of the amount accumulated in the 2nd pillar pension fund, but without those payments being inheritable).
      • If more than 60,000 euros is accumulated, the portion of the assets which exceeds that amount may be paid out as a lump-sum pension distribution, and the remaining portion shall be paid out until death through the purchase of an annuity.

What those concluding a new agreement should know

  • Pension funds’ money is invested in accord with a pension fund investment strategy approved by the Bank of Lithuania.
  • As a pension fund participant, you will have to pay the fees specified in the rules for the relevant pension fund. When accumulating in 2nd pillar pension funds, an asset management fee applies and pension fund assets may be used to cover currency exchange costs.
  • For participants of the 2nd pillar pension accumulation system prior to 2019, the state social insurance pension will be reduced proportionately as established by law. Starting in 2019, accumulation in a 2nd pillar pension fund will not influence the SODRA pension.
  • A 2nd pillar pension accumulation agreement cannot be terminated except in the case of a first-time agreement, which the participant may unilaterally terminate within 30 calendar days of the agreement’s initiation by informing the pension accumulation company about that in writing.
  • When accumulating in pension funds, the investment risk is borne by the pension fund participant – the pension accumulation company does not guarantee the profitability of investments. The past results of a pension fund are not a guarantee of future results and are not a reliable indicator of future results. Since the value of a pension fund can both increase and decrease, you may recover less than you invested. More information about the risks associated with pension fund investing can be found here.
  • When seven or fewer years remain before retirement, we suggest considering investing in a conservative investment pension fund.
  • You can find more information about pension accumulation at www.kiek.lt; www.sodra.lt; and www.lb.lt.

Once they have received a first contribution to their pension accumulation account, participants can change their pension accumulation company.


We’ve been managing pension funds ever since the first ones were established in Lithuania in 2004. The experience we’ve built up in the process allows us to offer clients a professional approach. We’re convinced that what’s made the expansion of our pension fund activity so successful is above all the attention we give to the needs of each client, along with these strengths:

  • Age-based asset management: We seek to offer the most suitable pension fund by adhering to the life-cycle pension fund concept, dividing up investment risk across the different stages of life.
  • Constant analysis: In an effort to ensure the best risk-return ratio, we constantly analyse changing market conditions and the potential of the most attractive investments.
  • Attention to clients: Four times a year our clients get e-mailed statements regarding the assets accumulated in their pension accounts, and they can review that information on the INVL self-service portal at their convenience.
  • Exceptional long-term results: For the most recent 5 year period, INVL’s pension funds were the best performers in most pension fund categories in terms of the average annual return they earned, excluding life-cycle funds (as per the pension fund results reported by the Bank of Lithuania for the end of 2018).

More information

  • If you have questions or want to know more about pension funds, call us at +370 700 55959 or write to us at [email protected].
  • You can sign a 2nd pillar pension accumulation agreement electronically.
  • For more information about INVL Asset Management‘s pension fund investing strategies, review our pension fund rules.
  • Here you can find fund reports and reviews.

Useful information and links:

  • Important INVL Asset Management UAB documents.

We remind you that for 2nd pillar pension accumulation participants, the state social insurance old-age pension for the period prior to 31 December 2018 is proportionately reduced as established by law, except for persons participating in pension accumulation prior to 31 December 2018 who between 1 January 2019 and 30 June 2019 exercise the right to terminate pension accumulation and return the accumulated money to SODRA – reduction of the state social insurance age-old pension will not apply to such persons. The SODRA pension will not be reduced for those participating in 2nd pillar pension accumulation as of 2019. The old-age pension is not reduced with regard to the state’s added contribution. A 2nd pillar pension accumulation agreement cannot be terminated except in the case of a first-time agreement, which the participant has the right to terminate unilaterally within 30 calendar days of entering the agreement by informing the pension accumulation company about that in writing. Persons who became participants prior to 31 December 2018 shall have the right from 1 January 2019 to 30 June 2019 to terminate participation in pension accumulation or halt the transfer of pension contributions to a pension fund.

Accumulating in pension funds entails assuming investment risk. The pension accumulation company does not guarantee the profitability of pension funds. The value of a pension fund unit can both rise and fall. You may recover less than you invested. A pension fund’s past investment management results do not guarantee the same kind of results and return in the future. The results of a previous period are not a reliable indicator of future results.

Responsible and thorough consideration is called for when choosing a pension fund. You should examine the investment-related risks as well as the applicable deductions, and carefully read the pension fund rules which are an integral part of the pension accumulation agreement.

If the money accumulated in a pension fund exceeds a certain amount, it must be used to purchase a pension annuity – a contract to receive periodic pension payments as long as you live. A pension annuity is mandatory when the basic pension annuity size calculated for a pension fund participant is at least half the size of the state social insurance basic pension (currently 164.59 euros, half of which is 82.3 euros). Pension annuity payments will be made to you by the life insurance company with whom you conclude an annuity contract. Your accumulated amount will be transferred to the account of that company, which in turn will commit to make annuity payments of an agreed size for the rest of your life. Whether any amount that has not yet been distributed at your death can be inherited depends on the type of annuity you choose. You can learn more about pension annuities here.

All the information presented is of a promotional nature and cannot be construed as a recommendation, offer or invitation to accumulate savings in pension funds managed by INVL Asset Management. The information provided here cannot be the basis for any subsequently concluded agreement. Although this information of a promotional nature is based on sources which are considered to be reliable, INVL Asset Management is not responsible for inaccuracies or changes in the information, or for losses that may arise when investments are based on this information.