22. January 2021
With the pension reform, pension savers who want to invest their pension money independently were given a new option. Already today, you can open a special pension investment account, or PIK at LHV Pank and start making plans for where to invest your money in autumn.
When establishing PIK, LHV Pank though about the convenience of the pension savers. In order for the client not to have to make any transactions themselves on an ongoing basis, it is possible to use automatic investment with PIK. It means that when a person who saves for retirement starts using the service, they have to choose the securities in which they want to invest and the bank makes securities purchase transactions on their behalf on an ongoing basis.
Let us take a closer look at how automatic investing works:
- Siim who is saving for retirement decides to transfer the new incoming pension payments to the pension investment account opened with LHV Pank.
- Siim turns on the automatic investment option via the Internet Bank.
- Siim selects the securities in which the investments will be made. These involve 5 shares from US stock exchanges: Apple, Coca-Cola, Nike, Microsoft, and McDonald’s. He invests equally 20% of his money in each.
- When the pay day arrives and a pension payment is made to PIK opened by Siim, he does not have to do anything himself. A total of 50 euros will automatically be invested and soon LHV will buy five different shares for Siim’s account as a broker, each for 10 euros. It is worth noting here that in case of automatic investments, it is possible to buy only a fraction of a share. For 5 euros, for example, Siim will receive about 0.1 of the share belonging to Coca-Cola.
- The automatic investment service fee is a favourable 1%, meaning that every month Siim has to take into account a service fee of 50 cents.
- As the pension investment account is for long-term asset growth, Siim no longer has to engage in the activities with PIK. As pension payments take place on a monthly basis over the years, the shares are purchased in a fragmented manner over time and the risk of losing money due to market fluctuations is lower. We would also recommend Siim to review his investments and consider whether there is a reason to change his investment choices or not.
The pension investment account provides all persons who save for retirement with the option to decide for themselves where to invest their Pillar II assets. In addition to automatic investments, people can also make transactions on their pension account or keep money as a deposit. The saving process takes place within Pillar II, the transfer of money from pension funds to PIK is free of charge, and it is possible to transfer money to back to the pension fund instead of investing independently, if necessary.
Read more: lhv.ee/pik