This week Luminor has introduced a sustainable 3rd pillar index plan in Latvia – Luminor Index Pension Plan Sustainable Future, which will allow the population to create savings for retirement, while taking care of the environment, sustainability and public welfare. The pension plan will invest in index funds, which in turn will invest in global companies that are leaders in their sectors in terms of environmental, social and corporate governance (ESG) criteria, thus, e.g., excluding companies involved in fossil energy extraction from the investment spectrum.

Luminor Index Pension Plan Sustainable Future is 3rd pillar pension index plan that promotes ESG criteria. Up to 100 % of the fund's assets will be invested in equity index funds. This will also be the first pension fund passively managed by Luminor. 

“With the growing interest of the population both in ensuring prosperity for retirement and in how to lead a more environmentally friendly life, we have taken the next step and offer our clients the opportunity to create savings in a sustainable way. Luminor Index Pension Plan Sustainable Future will invest in companies that are leaders in their sectors in terms of environmental, social responsibility and governance criteria. Companies extracting fossil energy are also completely excluded from the investment spectrum. Unlike other funds available on the market, Luminor Index Plan is distinguished by combining the passive management strategy with the promotion of ESG criteria, making it suitable for Latvians who want to support socially responsible investments,” says Atis Krumins, Head of Asset Management at Luminor.

In addition to the companies extracting fossil energy, Luminor Index Pension Plan Sustainable Future will avoid or minimize investments in non-ethical sectors such as weapons, tobacco, alcohol, nuclear industry, gambling sectors, genetically modified products and others. The passive management of the fund will in turn provide clients with diversity in the choice of savings vehicles, as this plan will closely follow the results of the stock market, instead of relying on the manager's opinion on situation in the financial markets.

Pension plan for younger persons 
The Luminor Index Pension Plan Sustainable Future is suitable for younger and middle-aged Latvians, those who still have at least 15 years till retirement age. By investing up to 100 % of the fund's assets in the stock markets, its participants take on a higher risk, which means that they are likely to experience significant fluctuations in the value of investments during the accrual period. However, it is with such a strategy that it is possible to achieve higher returns in the long term compared to a more conservative investment strategy. 

Saving for the future must start today
In order to be comfortable and not have to radically change your daily habits and living standards in retirement, the income after the end of active working life should preferably reach at least 70-80 % of the current monthly income. Considering that the average time spent by Latvians in retirement is about 20 years, people need to start taking care of their future well in advance. 

“According to most recent calculations, accruals in 1st and 2nd pension pillars will probably only be able to provide approximately up to 40 % of current income. Therefore, in order to have better financial security in retirement, we recommend the population to be actively involved in creating savings, and one of the most convenient ways is by accumulating in the 3rd pension pillar – regular contributions in the long term can create significant additional capital for retirement. It is crucial to remember that when forming accruals in pension funds, you should always pay attention to the investment risk – whether it is low, medium or high. If necessary, we recommend consulting with our specialists, it is essential to choose an optimal level of risk based on each person's age and other circumstances, as a strategy that is too risky or conservative will not be optimal to achieve the expected long-term results,” adds Atis Krumins.