Questions and answers

INDEXO is a financial services group striving for a better financial environment in Latvia.

 

The INDEXO group includes the fastest-growing pension manager in the Baltics by the number of clients, listed on the Nasdaq Riga stock exchange with nearly 6000 shareholders, and INDEXO Bank, which plans to start operations this summer.

We need a strong 2nd pension pillar in Latvia. The demographic situation clearly shows that with the 1st pension pillar quality ageing is not guaranteed.

 

Before INDEXO appeared on the market, we in Latvia paid the highest pension management commissions in developed countries, however, the result we got was weak – the average return since the system started was lower than inflation. Then more than 30 well-known entrepreneurs and managers in Latvia united in the INDEXO project to change this situation. And the market began to change.

 

INDEXO has won many positive changes in the pension administration market (for example, price competition, 2nd level inheritance, from which not only INDEXO’s clients, but the whole society benefit. Now we are working to do this in the banking sector and we are working to establish a new, strong, modern, and customer-friendly bank.

Transparency in costs, confidence in choices, direct language – that’s who we are.

 

Our main principles:

 

Low commissions, because we believe that the manager’s profit should not be disproportionately high compared to the value offered to the client.

 

Transparency in costs and performance of pension plans.

 

Our implemented index approach in the Latvian pension system shows the best long-term results in the industry.

 

We are a local company that fights for positive changes that benefit every resident of Latvia.

The 0.12 % commission that people see on their account statement is VSAA’s administrative cost. They are collected from each contribution, not from the total amount of assets.

 

The cost of managing the investment plan comes “on top” of these costs.

 

To find out the costs of managing your pension plan, go to the link manapensija.lv and find your plan in the “Basic information for participants of investment plans” section.

No one can predict market movements, so asset managers can not promise specific returns. It is also practically impossible to predict. Instead, INDEXO is based on worldwide research on an approach that is highly reliable in delivering good long-term returns.

 

This approach is characterized by two factors:

 

1) Significantly lower costs. Full cost transparency. No investment in expensive self-managed funds.

Global research shows that low costs are the best predictors of likely future returns. We have written more about it here: https://indexo.lv/blogs/ka-komisijas-aped-tavu-pelnu/.

 

2) Investment in global financial market indices. The so-called passive philosophy of asset management.

 

Thought in a nutshell:

 

We do not try to predict market movements and pick the “right” stocks or bonds. World studies show that this is practically impossible. When actively buying and selling financial instruments, more is paid in brokerage commissions than it is possible to earn.

 

Instead, we invest in the global markets as a whole and hold the investment for the long term.

 

Market fluctuations are expected in the short term. Periods of both profit and loss are expected, which can last for several years. In the long term, the world economy develops, market indices rise and the investor earns.

 

You can read more about why this approach is being adopted by more and more investors around the world here.

By law, 2nd pension pillar is anonymous – INDEXO and other asset managers do not know who their clients are. Therefore, you can view your personal 2nd pension pillar savings and investment plan only on the Latvian state portal: https://latvija.lv/lv/Epakalpojumi/EP229/Apraksts

 

For a detailed statement of your second pillar pension savings, follow these steps:

 

1) Go to the link: https://latvija.lv/Epakalpojumi/EP222/Apraksts.

2) Log in to latvija.lv (by clicking on “Start e-service”).

3) Tick “I am familiar with the specified information”, and press “Next”.

4) Choose statement no. 3 “2nd pension pillar member’s account statement”, press “Next” (below).

5) Choose the year for which you want to receive data, and press “Next”.

6) Press “Download statement”.

You can change your investment plan within a few minutes on the latvija.lv portal.

 

Click here and follow the instructions on the screen! If you have any questions, detailed instructions are available here.

That means if you haven’t changed your investment plan this year or have changed your plan but not the fund manager, you can join INDEXO.

 

If you have changed your fund manager this year (for example, from one bank to another), you can join INDEXO next year.

 

Good to know: If you submit a plan change request at the wrong time, your request will be denied, but that’s all – there will be no negative consequences.

On July 1, 2024, changes to the State Funded Pensions Law entered into force, as a result of which the 2nd pillar pensions is no longer anonymous.

 

From now on, pension managers will receive data on their clients every quarter. Including information about the pension plan chosen by the client with the specific administrator. It is the pension manager’s responsibility to ensure that their clients are in age-appropriate plans.

 

None of the managers will receive information about members who have changed pension managers. This means that unless you tell your bank or manager yourself about the plan change, no one will know about it. Even if the bank finds out that you have changed the plan, the law does not allow it to “retaliate” in any way – for example, by withdrawing the customer’s privileges or changing the terms of the loan. Therefore, you can choose the 2nd pension pillar investment plan freely, without fear.

 

To join INDEXO, go to the portal latvija.lv. Click here  – and you will immediately get to the right section of the portal.

The second pillar of the Latvian pension system is built with high security. The fund manager only directs where to invest the money but does not hold your savings. This means that any investment plan is as secure as any other.

 

In the case of INDEXO, Swedbank AS acts as the custodian bank for investors’ funds. For double security, all transactions go through the custodian bank and can only be executed with its approval. One of the main responsibilities of the custodian bank is to ensure that all orders comply with the law and the investment plan’s prospectus.

No. The segregation of funds held by the custodian bank ensures that the assets of any investment plan remain secure even if the fund manager experiences financial difficulties. In our case, the custodian bank is Swedbank AS.

Since the custodian bank holds investors’ funds separately, financial difficulties at the bank do not jeopardize the funds. For instance, during the “Latvijas Krājbanka” bankruptcy, pension funds remained secure at all times.

The market rises and falls. No one can control this. Therefore, no fund manager can guarantee that an investment plan will provide a specific level of return. The law also prohibits making such promises.

 

“INDEXO Jauda 16–50” is INDEXO’s pension plan with the highest potential returns, and therefore, the highest expected volatility. Choosing this plan means understanding that financial market indices can be very volatile in the short term. There will be periods of profit as well as crises and market declines. Thus, this plan is recommended for younger investors aged 16 to 50.

 

The investment plan “INDEXO Izaugsme 47–57” offers moderately high potential returns and moderately high volatility, making it suitable for investors aged 47 to 57.

 

Investing in market indices diversifies risk very effectively. Individual companies may stagnate or go bankrupt, but even if indices fall, they usually recover over time. In the long term, the global economy grows, and indices rise accordingly.

 

Therefore, for pension savings, investing in market indices with low costs is a very attractive choice. This is exactly what INDEXO offers.