PENSION ACCUMULATION CALCULATOR ASSUMPTIONS
General notes
Amount of future pension presented in calculator should be understood as a pension you could receive today and would be able to purchase goods at today’s price as results are presented at real values. Therefore, you may compare the amount of future pension calculated by the calculator against currently received salary.
Pension annuity amount (pension benefit) calculated by life insurance company may be lower or higher as compared to the one calculated by the calculator as it depends on specific pension annuity type and assumptions used by life insurance company that may differ from the ones used by calculator (mortality tables, annual interest rate, deductions for covering annuity acquisition and administration fees).
Accumulation for pension under “Swedbank” pension services (2nd pillar pension)
A portion of old age pension from first and second pillar is calculated on the basis of calculator “Future old age pension calculator” prepared by Ministry of Social Security and Labour of the Republic of Lithuania, Bank of Lithuania, State Social Insurance Fund Board (“Sodra”), Lithuanian Investment and Pension Funds Association and Lithuanian Life Insurance Companies Association. Available at the address www.pensijuskaiciuokle.lt.
“Sodra” pension amount is not guaranteed as it may be lower or higher depending on economy, demography and amendments to legislation of the country;
It is assumed that salary increase is non-existent (this assumption is chosen by taking into consideration the assumption of “Sodra” regarding fixed salary used for predicting future pension on E-Servicing Systems for the Public (EGAS));
Real/net annual return on investment is used in calculations (after all deductions, upon assessing inflation) depending on initially selected pension fund:
Pension 1: -0.5%, Pension 2: 0.5%, Pension 3-5: 1.5%.
It is assumed, that in order to reduce investment risk upon approaching retirement, pension funds shall be changed, thus, return on investment shall be achieved through entire accumulation period by participating in different funds.
Actual net salary (after taxes) received is used.
Length of service is continuous from the start of employment and state social insurance premium payment to retirement;
State social insurance old age pension amount is proportionally reduced for individuals participating in pension accumulation system under procedure provided for in legislation.
A person retires at the retirement age (without postponing or applying earlier); retirement age of 65 for both females and males by 2026 as provided for in legislation is used.
Investment risk is assumed when accumulating in pension funds and there are no guarantees investment value shall increase.
Upon retiring, the person purchases annuity for entire amount accumulated in pension fund. Pension annuity is periodic pension benefit paid to the participant till his/her death. Payment risk of annuity falls on the payer of benefits, i.e., life insurance company. Pension annuity is obligatory when basic pension annuity amount calculated for participant of pension fund is at least half of the amount of basic state social insurance pension. Pension annuity amount in the calculator is calculated on the basis of Lithuania’s life expectancy at birth predicted by European Commission. Annuity interest rate used depends on chosen pension fund and the return thereof: Pension 1: 0.5 %, Pension 2-5: 1%. One-time settlement amount for covering annuity purchase and administration expenses equals 5 % from the value of funds accumulated in pension fund. It is assumed that standard non-indexed pension annuity is purchased on the basis of which fixed benefits are paid each month till the death of a person who purchased pension annuity.
Portion of old age pension of state social insurance is calculated on the basis of 2015 legislation applicable. It is assumed that in the future state social insurance pension shall be reduced in a way as provided for in currently applicable legislation.
Amounts of pension contributions and deductions specified in legislation, pension fund rules applicable in 2015 for current and other periods are used.
Accumulation for pension under “Safe pension fund” investment life insurance service (3rd pillar pension)
Calculation assumptions according to which amount additionally accumulated for pension is calculated when choosing accumulation according to investment life insurance services are presented below.
Calculations are made upon assessing following standard service fees: Safe pension fund (1.25 % annual administration fee but not less than 2.03 EUR/month. A 10% discount is applied from investment value of the agreement when accumulated investment value is > EUR 10 000 and 0.20 % annual guarantee fee)
Investment life insurance agreement is concluded before retirement (without postponing or applying earlier); retirement age of 65 for both females and males by 2026 as provided for in legislation is used
Following nominal annual investment yields are used in “Safe pension fund” calculations: 7% for global equity investment direction, 4% for medium-term bond investment direction, 2% for short-term bond investment direction. Allocation between equities and bonds is made gradually in this service depending on accumulation period. At the beginning of agreement period, investments are made in equities to earn higher returns, while at the end of the agreement, the portion of bonds is increased in order to ensure stable return and retain amount accumulated. In case of “Safe pension fund”, a guarantee is given for the amount accumulated – at the end of agreement you will get at least the same amount you have paid after deducting agreement fees even if the return is negative. Upon terminating the agreement before maturity or if the agreement is terminated for other reasons (in case of death), the guarantee for amount accumulated is not applied and investment value of the agreement is paid out.
Amount additionally accumulated for pension according to investment life insurance agreement is recalculated at today’s value by using 4% discount rate (i.e., by performing such action, current value of future value is obtained).
The customer purchases pension annuity for the amount accumulated in investment life insurance. The size of pension annuity is calculated by the calculator on the basis of same principles used for calculation of pension annuity for the amount accumulated in “Swedbank” pension fund, however, 1% interest rate is applied in case of investment life insurance. Annuity purchase is not obligatory in this case.
Safe pension fund is investment life insurance service where the policyholder bears the investment risk. The insurer does not guarantee investment yield and accumulated investment value. Amount accumulated in investment life insurance agreement may rise of fall depending on actual yield of investment direction.
If you have any questions, please contact us by phone +370 5 268 4444 or 1884 and consult us on how to conclude agreement or make changes on “Swedbank” Internet Bank, you may also make an appointment at the nearest bank branch.
