III pillar

Investment in the future on which the state refunds the income tax

  • Ensure your future through the third pillar
  • A wise monthly investment
  • The state refunds the income tax on the investment
Income tax incentive

The state refunds the income tax on the money invested in a third pillar pension fund. The allowance applies to payments that represent up to 15% of your gross income, but not in excess of 6000 € per year. For instance, if you invest 100 €, you will receive an income tax refund of 20 € next March.

III pillar funds

LHV Täiendav Pensionifond
  • Medium risk level.
  • Suitable for pension savers aware of investment risks, who wish to make long-term investments in a supplementary funded pension, with the aim of using the accumulated money after reaching the age of 55.
Strategy

The fund makes significant investments in equity markets: to ensure maximum growth, the proportion of equity markets is kept close to 75% of the value of the fund’s assets. The proportion of equity markets may also be higher – up to 95% – or lower (in recent years close to 40%), if considered reasonable by the fund manager.

Expenses

Entry fee 0% / Exit fee 1% / Management fee 1%.

Information about the fund

Volume of the fund (as of 30.11.2018)14,892,511.51 €

Price of a unit

Management companyLHV Varahaldus

Rate of the depository’s charge0.0588%

DepositoryAS SEB Pank

We will allocate your money into international enterprises, the development of which we believe in. At the same time, it must be taken into consideration that the future of these enterprises depends on both their internal decisions as well as the changes in the global economy.

The data is presented as at 30.11.2018.

Biggest investments
EfTEN Kinnisvarafond5.55%
Luminor Bank 10/20214.02%
iShares DAX EX3.26%
East Capital Baltic Property Fund III3.10%
East Capital Baltic Property Fund II2.70%
Citadele banka 12/20262.70%
JP Morgan Chase 08/20212.13%
Wells Fargo & Company 07/20212.12%
PKO Bank Polski 01/20192.10%
Tallink Grupp2.06%
Current asset allocation
Money and deposits2.81%
Government bonds8.02%
Corporate bonds44.58%
Real estate13.05%
Shares31.54%
Regional distribution
Money and deposits2.81%
The Baltic states42.94%
Europe (excl. the Baltic states)37.13%
Asia4.38%
North America12.36%
Other0.38%

The month was turbulent for stock markets

Romet Enok, Fund Manager

October was a turbulent month on global stock markets and the stock exchanges of developed as well as developing countries fell. The Japanese stock exchange was hit the worst, with the value of the index dropping by 9.1% in a month, when measured in the local currency. The level of the stock index, including the 50 largest European public companies, dropped 5.9% over the months and by countries, the biggest losers were Finland with -8.9% and Germany with -8% rate of return. The stock index in Germany, however, dropped by 6.5%. This time, the Baltic stock markets, which so far had held up well, also went along with the decline.

The rate of return of the additional pension fund was affected by investments in Finnish public companies, which predominantly followed the overall market decline in October. Bigger fallers for example, included the timber company Stora Enso, whose share value dropped 20.7% over the month. Since we believe that the company is still strong, we used the possibility to buy more shares at a favourable price. However, we sold the shares of Finnish real estate company Technopolis, which received a takeover bid with a very good price level.

We made two major investments in the fund’s bond portfolio. First, Luminor bank sold international bonds – the expected rate of return is 1.6% and repayment will be after three years. As previously planned, we replaced the bonds issued by Luminor for the funds at the end of last year with the new investment. Second, we purchased subordinated bonds of Danske Bank when their price dropped as the accusations worsened in connection with suspected money laundering. A significant fine is most likely what will follow for the bank. On the other hand, the core activities and markets that are important for the bank remained untouched by accusations and still have very good profitability. The biggest Danish investment fund and important shareholder of Danske Bank has announced its support to help the bank overcome the problems. The investment is made into subordinated dollar bonds, where the first possibility for the bank to redeem them is in six months and which, as such, offer a nearly 8% annual rate of return. From international bond markets, Europe remained slightly negative in October, while the decline in the US and developing countries was more severe. The same situation can be seen when measured from the start of the year – -0.5% for Europe up to -3.5% for developing markets.

Pension agreement

The state does not tax payments from the 3rd pension pillar if you have concluded an insurance contract under which regular pension payments will be made to you for the rest of your life.

See more at Pensionikeskus.ee

Resale of shares

Fund shares can always be sold, in which case income tax applies. After turning 55, but not before five years have passed from the initial investment, disbursements are taxed a rate of 10%.

The third pillar savings can also be bequeathed

The heir can then decide what to do with the inherited assets—whether to transfer them to their account or to withdraw the amount in cash.
Income tax of 20% applies to cash withdrawals.

LHV Pensionifond Indeks Pluss
  • High risk level.
  • Suitable for investors with a high risk tolerance, who are prepared to tolerate the risks arising from potentially significant fluctuations in equity markets. Investing in the fund assumes previous investment experience.
Strategy

The fund invests all of its assets in equity markets and the fund manager does not actively change the fund’s risk level. The fund’s assets are invested in index-following investment funds. The share of funds investing in equities is kept close to 100% of the fund’s volume. Whenever the share of money exceeds 2% of the fund’s volume, the free money is invested at least in the amount exceeding 2%, within five banking days.

Expenses

Entry fee 0% / Exit fee 0% / Management fee 0,39%.

Information about the fund

Volume of the fund (as of 30.11.2018)1,972,247.30 €

Price of a unit

Management companyLHV Varahaldus

Rate of the depository’s charge0.0588%

DepositoryAS SEB Pank

We invest the assets of the fund in index-following investment funds. We keep the share of funds investing in equities close to 100% of the fund’s volume. Whenever the share of money exceeds 2% of the fund’s volume, we invest the free money, at least in the amount exceeding 2%, within five banking days.

No particular indices are followed in investing the assets of the fund. Investments in investment funds investing in equities are distributed between three types of markets – developed markets, emerging markets and frontier markets – based on their approximate share in global gross domestic product (GDP).

The data is presented as at 30.11.2018.

Biggest investments
iShares Core MSCI World UCITS28.86%
db x-trackers MSCI Emerging Markets Index UCITS27.63%
Lyxor Core MSCI World DR UCITS27.62%
db x-trackers MSCI World Index UCITS ETF7.83%
Vanguard FTSE Emerging Markets UCITS ETF4.60%
iShares MSCI Frontier 100 ETF2.53%
Current asset allocation
Money and deposits0.93%
Shares99.07%
Regional distribution
Money and deposits0.93%
Emerging Markets32.23%
Frontier Markets2.53%
Developed Markets64.31%

Pension agreement

The state does not tax payments from the 3rd pension pillar if you have concluded an insurance contract under which regular pension payments will be made to you for the rest of your life.

See more at Pensionikeskus.ee

Resale of shares

Fund shares can always be sold, in which case income tax applies. After turning 55, but not before five years have passed from the initial investment, disbursements are taxed a rate of 10%.

The third pillar savings can also be bequeathed

The heir can then decide what to do with the inherited assets—whether to transfer them to their account or to withdraw the amount in cash.
Income tax of 20% applies to cash withdrawals.

Market overview of pension funds

LHV pension funds offered shade for the decline in October
Andres Viisemann, Head of LHV Pension Funds

October has always been a nervous month for equity investors, with stock market fluctuations higher than usual. In both October 1929 and October 1987, the US stock markets were in free fall. These stock market crises have been written about so extensively in the history of securities markets that October is considered to be a bad month for stock prices, even though statistics do not confirm this. However, in October this year, stock prices were falling again and only a few markets, such as Brazil and the Philippines, were on the upside.

Ask for advice

Do not hesitate to ask, together we will find a suitable solution.

Reet Roos
Pension Consultant
Mon–Fri 8–17
680 2743
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