Since the beginning of this year, the possibility to inherit the 2nd pillar pension savings has come into effect in Latvia. Therefore, it is important to know, what to do to ensure that your accumulated pension capital is received by your heirs. If a person wants his or her accumulated 2nd pillar pension capital to be inherited, it has to be indicated at SSIA, making the respective choice.
“The possibility to inherit the accumulated 2nd pillar pension savings is a significant step towards transparency of the pension system, which definitely raises trust of residents and their willingness to participate in the system. By the end of 2019, the 2nd pillar pension had more than 1,3 million participants with the average savings of approximately 3,470 euros. Now, each of these participants can choose, what will happen with his or her accumulated pension capital after his or her death – how and who will inherit the accumulated savings. It is an essential part of the personal capital planning and management process and, I think, that this opportunity definitely has to be used. As a result of this addition to the law, the 2nd pillar pension capital becomes much more personalised and gains a direct link with person's actual monetary savings. Consequently, before making a choice, it is also important to find out, how large is your accumulated pension capital, who manages it and what is the outcome of such management,” states Anželika Dobrovoļska, Luminor Pension Product Manager.
Starting from this year, a participant of the 2nd pillar pension, also if this participant has not reached the retirement age, is entitled to choose, how his or her accumulated 2nd pillar pension capital will be used. In order to do so, an application can be submitted on the portal www.latvija.lv starting from 1 January. If necessary, it can also be done on-site at SSIA customer service centres or sent electronically with an e-signature and time stamp.
Each participant of the 2nd pillar pension can choose one of three inheritance options. This decision can be changed; so, upon various personal circumstances changing, there will be a possibility to choose a new inheritance option or person:
1) To bequeath according to the procedure specified in the Civil Law.
In this case, the heirs will be able to find out the amount of the accumulated 2nd pillar pension capital of the deceased at sworn notary, when commencing settlement of inheritance issues, or asking about the choice of the deceased at SSIA. Upon receiving the certificate of inheritance, the heir will have to fill in an application, where the choice of receiving the inherited amount is indicated – money transfer to a bank account or adding to the heir's 2nd pillar pension capital.
2) To add to the capital of funded pension of a particular person.
In this case the person, the accumulated 2nd pillar pension capital of whom the accumulated capital of the deceased has to be added to, will have to be indicated in the application. This person does not have to be a relative, and it can be any natural person. However, if the indicated person is not a 2nd pillar pension participant on the day, when the fact of death of the 2nd pillar pension participant is registered, the pension capital will be inherited pursuant to the procedure stated in the Civil Law.
Information on adding of the capital of the deceased 2nd pillar pension participant will be available on the portal www.latvija.lv and the accumulated 2nd pillar pension capital, including the added pension capital of the deceased, will be available for use upon reaching the retirement age.
3) To transfer to the special budget of state pensions.
There is also an option to transfer the accumulated 2nd pillar pension capital to the budget of state pensions. This scenario will be implemented also in the case, when no choice regarding inheritance of the 2nd pillar pension capital will be made.
Previously, the 2nd pillar pension capital could be used only after reaching the retirement age, also making a choice – to add the 2nd pillar pension savings to the savings of the 1st pillar pension or take out lifetime pension insurance policy with inheritance possibilities. But, if a person died before the retirement age, the accumulated capital was transferred to the budget of state pension.
Additional information: Inese Kronberga