25.10.2023
At the end of November, LHV will be amending both the names and the terms and conditions of all of its III pillar funds. In addition to key investment-based changes, the oldest of LHV’s III pillar funds – previously known as the LHV Täiendav Pensionifond or ‘Additional Pension Fund’ – will drop its exit fee and reduce its management fee. Neither entry nor exit will be charged on any of the funds, and all will come with lower management fees. The new names of the funds will also more clearly reflect their investment principles.
The changes were primarily driven by feedback from clients and the wish on the part of the fund manager to expand yield-generating opportunities by investing in new asset classes. The new names and terms and conditions will take effect on 27 November.
Joel Kukemelk, a member of the management board of LHV Varahaldus, says the decision to simplify the choice of funds in LHV’s III pillar and to reduce the fees payable on them was taken to ensure that neither the fees nor the seeming complexity in the choice of funds would create a barrier to additional saving for retirement. “Clients will now have the choice of three different III pillar funds in LHV,” he explained. “The first is the actively managed Aktiivne III or ‘Active III’ fund (the former Täiendav fund), investing in different asset classes. The second is the green transition fund Roheline III or ‘Green III’ (the former Roheline Pluss fund), which is designed for people with a green worldview. And the third is the index fund Indeks III or ‘Index III’ (the former Indeks Pluss fund), which invests in equity indexes based on the size of the world’s economies.”
Kukemelk added that the pensions paid in Estonia remain low and that the drop in monthly income to which people are accustomed comes as a shock to many when they reach pensionable age. “If people still want to enjoy life during their retirement, they should be making the most of the opportunity to put more money aside in both the II and III pillars,” he advised. “Both are the most tax-effective ways of getting your money earning for you. Payments into the II pillar are made on the basis of your pre-tax gross salary, while those into the III pillar are made from your net salary, with the state reimbursing any overpaid income tax when you lodge your tax return. The changes being made to all of our III pillar funds share the same purpose: to generate higher returns and therefore a bigger pension for savers through the best possible investments opportunities.”
Overview of changes
LHV Aktiivne III
- The list of fees payable on and costs associated with the funds is constantly being updated. The exit fee is being dropped and the management fee reduced from 1.00% to 0.89%.
- Following these changes, the fund may fully invest its assets in equity markets. Investments will favour foreign markets, more liquid instruments and instruments traded on the regulated market, but assets may also be placed in asset classes not traded on the stock exchange.
LHV Indeks III
- As per LHV’s II pillar index fund, this fund’s investments will continue to be made in developed and emerging markets based on the relative size of the world’s economies. The fund will no longer invest in frontier markets. As such, the ongoing fees payable on the fund – which is already one of the most competitive III pillar funds in Estonia – will be even lower.
LHV Roheline III
- In investing its assets, this fund is set to gain greater freedom to also choose funds which are not traded on the regulated market, but which are simply mutual funds.
- Roheline III may now take more of a concentration risk than before, and invest in asset classes in which it was previously not permitted to invest. For example, it may now invest up to a quarter of its assets in precious metals and raw materials linked to the green transition.
LHV pension funds are managed by LHV Varahaldus. LHV’s III pillar funds have more than 34,000 clients. The volume of assets in the three funds exceeds 75 million euros. LHV’s oldest III pillar fund, Täiendav, was launched in 2001. A comparison of all of the III pillar funds operating in Estonia can be found online at https://www.lhv.ee/et/pension/iii#allFunds.
All news