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 31.01.2019)15,250,286.61 €

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 31.01.2019.

Biggest investments
EfTEN Kinnisvarafond5.56%
Luminor Bank 10/20213.95%
East Capital Baltic Property Fund III3.21%
iShares DAX EX3.15%
East Capital Baltic Property Fund II2.75%
Citadele banka 12/20262.58%
JP Morgan Chase 08/20212.13%
China Development Bank 11/20212.09%
Volkswagen Intl FIN NV 03/20191.97%
Total Capital Intl 03/20201.97%
Current asset allocation
Money and deposits2.78%
Government bonds7.84%
Corporate bonds45.36%
Real estate13.21%
Shares30.90%
Regional distribution
Money and deposits2.78%
The Baltic states41.22%
Europe (excl. the Baltic states)35.86%
Asia4.51%
North America15.34%
Other0.38%

December was a turbulent month on stock markets

Romet Enok, Fund Manager

December once again experienced turbulence on global stock markets, and the stock exchanges of the developed as well as developing markets mainly declined. The rates of return of global stock markets remained largely in the red throughout 2018 as well. In December, the Japanese stock market index dropped by 10.5%, measured in local currency and by 8.8% measured in euros. In Europe, the biggest losers included Sweden and Germany, where the stock market indices dropped by 6.6% and 6.2% respectively during the month. The rate of return of Helsinki Stock Exchange remained at -3.4% and the decline was largely caused by Finnish forest companies. The share prices of Metsä Board and Stora Enso, belonging to the supplementary pension fund, dropped by 18.9% and 12.6%, respectively. This time, the overall decline also affected the Baltic stock markets. The rate of return was -5.2% for Tallinn Stock Exchange, -4.1% for Vilnius Stock Exchange and -2.8% for Riga Stock Exchange.

Nelja Energia, acquired by Eesti Energia, prepaid its bonds to the fund. The securities issued in 2015 yielded at an annual interest income of 6.5%, to which a 4% premium was added for early redemption. The European bond funds stabilised in December after a quite abrupt fall in November. Still, the situation is completely different from that seen in the last years, and the unwinding of the monetary stimulus of the European Central Bank is clearly revealing itself already in a higher price for corporate loans. We have avoided the acquisition of long-term bonds from the markets over the couple last years, which protected us this year from the price depreciation, and which together with the abovementioned early redemption of bonds provides the fund with significant resources for making investments, should favourable opportunities open up this year.

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 31.01.2019)2,349,308.48 €

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 31.01.2019.

Biggest investments
db x-trackers MSCI Emerging Markets Index UCITS28.99%
Lyxor Core MSCI World DR UCITS27.92%
iShares Core MSCI World UCITS27.71%
db x-trackers MSCI World Index UCITS ETF6.50%
Vanguard FTSE Emerging Markets UCITS ETF4.04%
iShares MSCI Frontier 100 ETF2.72%
Current asset allocation
Money and deposits2.12%
Shares97.88%
Regional distribution
Money and deposits2.12%
Emerging Markets33.03%
Frontier Markets2.72%
Developed Markets62.13%

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

2019 will bring a major impetus for the development of Estonian capital markets
Andres Viisemann, Head of LHV Pension Funds

2018 started with fair optimism on the securities markets, but ended with a complete mess. There was really no reason to complain about the overall health of global economy. The US economic growth was modest and corporate profits demonstrated strong growth. While the economic growth in China decelerated, it still grew by more than 6%.

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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