Why the pension capital should be invested?

Number of elderly people is increasing in the country, as well as their life expectancy increase. It is therefore the question of particular importance, how to increase the pensions and to ensure material well-being for pensioners.

By joining the 2nd and/or the 3rd pension pillar, you will be able to insure a bigger pension in old age, because it foresees that part of your social security pension contributions or voluntary contributions to private pension scheme through fund managers are invested in the financial and capital market – securities, risk capital and deposits in banks, which provide a greater increase of your investment value in the future.

Why one cannot just save up money, putting it in a pile and after retirement to take part from the pile each month? The answer is quite simple – the value of the money in the pile decreases every year, because of the inflation. Investing money in the financial market can provide that in the long term purchasing power of money is maintained. World experience shows that by investing in the financial markets, in the longer term it is possible to earn more than the inflation is “eating up”, because in the long term these investments have higher return than the price increase. Acting by the principle “money earns money”, pension capital can grow several times over several decades, compared to the initial contributions. Investing part of the social security contributions and contributions to the voluntary pension scheme gainfully, it is possible to increase the total pension capital and the expected amount of pension, because a person, when retired, gets accumulated pension capital together with investment profit.

That, how much you will earn will depend on your chosen investment plan or pension fund`s profitability or initial payment increase, expressed in percentage.Profitability is one of the key issues that will determine your pension amount. Capital gains of your pension you will be able to find out, depending on how the value of your investment plan unit has changed. As a fund manager determines the unit value and informs the State Social Insurance Agency (the SSIA) every day, you can also follow your 2nd pillar pension capital every day.