Tuleva was fined for violating communication rules. The Financial Inspection, which imposed the fine, accused us of using two sentences in our July Facebook ads: “Keep the profitability of your pension assets” and “The only one with honest statistics.” Additionally, FI found that we had omitted mandatory disclaimers from some advertisements. (1)

FI considered the phrase “Preserve the productivity of your pension assets” as a promise that the returns in Tuleva are guaranteed. This was certainly not our intention. We communicate directly and straightforwardly about Tuleva, and if we had wanted to say that returns are guaranteed, we would have said so plainly. Since the beginning, we have emphasized that the surest way to achieve good returns is by keeping as much of the return on your assets for yourself, rather than paying fees to the bank. Instead of guaranteeing apparent returns, we emphasize that your returns are unlikely to move steadily upward.

However, understanding our texts occurs through the eyes of the reader, not the speaker. We need to test our texts and designs more effectively to avoid any misunderstandings.

FI found the advertisement “The only honest statistics” misleading. The issue was not the content of the advertisement – in my opinion, no other fund manager today shows the returns earned by individuals in their pension funds in a comprehensible way per annum basis. We were criticized for not providing a clear explanation in the advertisement for why it is considered “the only honest statistics.”

We need to continue working on the methodology for displaying returns. When Tuleva started, we were the only ones honestly discussing fees and including all costs in the fund’s fees. Others did not do this until the law and the Financial Inspection obligated them to do so. Similarly, we now need to achieve the same with displaying returns: ensuring that every saver first sees their personalized return on an annual basis, not some arbitrary period’s change in share price or a return figure that does not consider how many years a person has been saving.

Our goal is to improve pension savings in Estonia.

This goal is even enshrined in our articles of association: to contribute through communication activities so that saving becomes a simpler and more understandable activity for everyone in Estonia. But we do not operate in a vacuum. The financial sector constantly releases a large amount of information that hinders decision-making.

The extensive decision by the Financial Inspection is an important starting point for setting our activity goals. Over the next two weeks, I will systematically explain in a blog series the issues we are addressing with our communication, the rules we were deemed to have violated according to FI, what we can improve ourselves, and what regulations or practices need to be changed to truly make saving better and easier for people.

I am very grateful to many Tuleva members who have already offered their advice and support. If you have any questions, feel free to contact us at [email protected] or call us at 644 5100.

(1) You can find the Financial Inspection’s announcement regarding the decision here (in Estonian). The fine is the fund manager’s cost and does not affect savers in pension funds. We have grown so much by now that this substantial 100,000-euro fine does not hinder or slow down our operations. Nevertheless, we are considering appealing the decision and will decide in the coming weeks.

Tuleva investors will benefit from reduced fees once again! At Tuleva, we believe that the more investors join our ranks, the less everyone should pay in fees. This core principle drives our operations. Thanks to the remarkable growth in our assets, which have increased by 160 million euros since the beginning of the year, we are pleased to announce another round of fee reductions for our funds.

From 1 October, fees across all our funds have dropped by an additional 0.02 percentage points. As a result, the fees for the Tuleva Third Pillar Pension Fund now stand at just 0.33%.

For second pillar investors, the Tuleva World Stocks Pension Fund fees are 0.35%, and 0.39% in the Tuleva World Bonds Pension Fund.

For Tuleva members investing with us is even more advantageous than these fees suggest. A unique feature of Tuleva is that a portion of our fees are returned to our members. Each Tuleva member will receive 0.05% of the value of the assets accumulated in Tuleva’s second and third pillars as a membership bonus every year.

Tuleva stands out as the fund management company with the most competitive average fees in Estonia (1). The reason behind this is simple – we only offer good, low cost funds, while our competitors provide a mix of high-fee funds alongside more affordable options.

Tuleva stands out as the fund management company with the most competitive average fees in Estonia (1). The reason behind this is simple – we only offer good, low cost funds, while our competitors provide a mix of high-fee funds alongside more affordable options.

It is crucial to note that our fees are continuously decreasing at Tuleva. The current fees for pension funds in Estonia are unfortunately on the rise. The most significant impact can be seen in the fees of the two largest second pillar funds. Over the past two years, fees for LHV L have surged from 1.14% to 1.95%, while fees for the Swedbank 1970-79 Fund have increased from 0.65% to 0.77%.

Why do fees matter so much?

A simple rule applies when it comes to investment funds: the less you pay in fees, the more you retain from the returns generated by your assets (1). This is why reducing fees is the most effective way to improve your return on investment. While the fees for pension funds may appear small as percentages, higher fees can significantly erode your savings over time – find out how. 

Use our fee calculator to compare second pillar funds in Estonia.

Why are we lowering our fees now?

At Tuleva, our approach is straightforward – the more investors we attract, the lower the investment costs for all members. We review our fees regularly.

While the volumes managed by banks’ fund management divisions have declined due to people exiting the second pillar, Tuleva continues to experience robust growth. Our funds now exceed 550 million euros in total, with over 65,000 people already investing in Tuleva’s second and third pillars.

The timing of this reduction in costs is primarily due to lower custodial fees. Pension funds are required to entrust their assets to a custodian bank that holds the fund’s securities and executes transactions on its behalf. This ensures that investors’ assets are consistently kept separate from those of the fund management company. Deposits flow directly to the custodian bank and, from there, to the global securities markets. While this practice safeguards assets, it also involves fees charged by custodian banks. Thanks to our significant growth, we’ve been able to negotiate a reduction in these fees with our custodian bank.We are actively pursuing further fee reductions. There’s no need for external pressure from the state or competitors to prompt Tuleva to lower its fees. What motivates us is that Tuleva’s owners are the same people who grow their assets in our pension funds. Keeping costs under control benefits our members and assures other Tuleva customers that investing in our funds will become even more economical

What sets Tuleva apart?

Tuleva operates with a distinct mission: to help people build their future wealth with confidence. This is achieved by regularly setting aside funds and steadily growing their stake in the world’s largest companies. To fulfil this mission, we adhere to several fundamental principles:

Only good funds. At Tuleva, we do not hide good options among the bad ones. It is great that, following Tuleva’s lead, banks have begun to introduce index funds with lower fees to their product range. Unfortunately, these banks still have a vested interest in keeping the majority of their customers in high-fee legacy funds. At Tuleva, no customer pays more than 0.39% in fees.

For example, our largest fund, Tuleva World Stocks Pension Fund, charges a mere 0.35% in fees. By way of comparison, Estonia’s largest pension fund, LHV L, imposes fees of 1.95%, nearly five times higher.

Growth is important. We understand that the more significant our fund volume becomes, the lower the costs are for all our investors.

During our first years of operation, we learned that it is not enough to merely introduce good funds to Estonia. To ensure that more and more investors discover modern, low-fee index funds, we must help cut through the information noise and advertising clutter. As more people save wisely and consistently with our assistance, Estonia benefits as a whole.

Low fees. As previously mentioned, the cost of investing with Tuleva continues to decrease. While this does not imply that you cannot find funds with lower fees elsewhere, Tuleva believes in maintaining fairness by not subsidising the costs of smaller funds at the expense of other clients for marketing purposes.

Why do we personally invest with Tuleva, and why do we recommend it to our loved ones? By choosing to save with us, you can be confident that your funds are among the most affordable in Estonia and have the assurance that fees will continue to decrease in the future. Your returns will closely track global economic growth, and you can rest assured that Tuleva employees will never seek to sell our customers poor and costly investment products.

What can you do today to benefit more from your pension pillars? 

• Review your pension funds and make sure you are investing in both the second and third pillars with a low-fee index fund, maintaining annual fees of less than 0.5%. As a member, you will earn a membership bonus on your pension pillars with Tuleva.
• Check your third pillar contributions before the end of the year. If they are below 15% of your annual gross income (and also less than 6,000 euros), consider investing more to take full advantage of the tax incentive and receive a higher income tax refund in the spring.

By taking these steps, you will have a very good chance of accumulating substantial wealth for your future through your second and third pillars. 

Log in to your pension account

1. Ministry of Finance pension statistics review 2022, https://www.pensionikeskus.ee/statistika/ii-sammas/rahandusministeeriumi-statistika/

If you have just a 1 minute to read:

• Since the beginning of the year, world stock markets and the prices of Tuleva’s World Stocks Pension Fund and Tuleva’s Third Pillar Pension Fund units have increased by 15%. Over the past five years, the price of a unit in Tuleva’s World Stocks Pension Fund has grown by an annual average of 8.3% (1).
• Monthly contributions, new savers, and market growth have collectively increased the assets of Tuleva’s pension funds by 155 million euros.
• The number of people leaving Tuleva’s funds continues to be significantly lower than average for Estonian second pillar pension funds.
• The Tuleva team is expanding, and we are actively seeking new talent.

World stock prices have surged since the start of the year

Our pension fund assets closely follow the world market index. Since the beginning of this year, world stock prices, including those of Tuleva’s World Stocks Pension Fund and Tuleva’s Third Pillar Pension Fund units, have increased by 15%.

While short-term performance, a few months or a few years, doesn’t offer insights into the long-term growth of our assets in Tuleva’s funds, historical global financial market data reveal certain patterns further supported by Estonian pension fund statistics.

1. Low-cost index funds tend to outperform high-cost pension funds in the long run.

No actively managed pension fund in Estonia has outperformed the global market and index funds over the past five years. Estonia is not an exception in this regard. Globally, high-fee funds consistently underperform low-cost index funds. (2)

2. Fluctuations bring good returns

Past performance does not reliably predict future performance. If the history of the markets has taught us anything, it is that stock prices go up and down. Sooner or later, we may all experience prolonged periods when the value of our account goes down for several months or even years. Why do we – and even the Swedish state, for that matter – think that a stock fund is a good choice for building your most important financial asset?

The answer is straightforward: there is no such thing as a risk-free return. On its website, the Swedish Pensions Agency goes as far as to state that fluctuation in asset prices is a prerequisite for earning returns. Compared to bonds, global stock markets have significantly bolstered investors’ wealth over the last century, surpassing inflation and aligning with economic growth. While past performance doesn’t necessarily predict future outcomes, it remains the most reliable indicator we have regarding future prospects (5).

Therefore, for savers, reducing risk typically means accepting a lower expected return. Most of us don’t earn enough to accumulate substantial capital for the future without the help of returns. Nevertheless, it’s crucial to remember not to invest money in a stock fund if you’ll need it in the next few years

Five-year decline in bond fund unit prices

The unit price of Tuleva’s World Bonds Pension Fund has fallen by an average of 1.7% per year over the past five years, totalling a loss of 8.9%. However, the unit price has rebounded by 0.8% since the start of this year.

Bond prices move inversely to their current yields. Five years ago, the current yield for global investment-grade bonds in euros stood at 0.8% annually, while it has risen to 3.5%, today. This is good news for those purchasing bonds now. Unfortunately, the value of bonds bought five years ago, as well as the unit value of our bond fund, has significantly declined.

Tuleva’s World Stocks Pension Fund is now 100% invested in equities

Following the last bond sale in March, our World Stocks Pension Fund is now 100% invested in stocks, fully mirroring the portfolio of Tuleva’s Third Pillar Pension Fund. Since the second half of 2019, legislation has allowed second pillar funds to allocate 100% of their assets to stocks, compared to the previous limit of 75%. We chose a gradual transition over three years and, by the beginning of this year, only about 5% of the fund’s assets remained in bonds. In March, we also exchanged this remaining portion for stocks.

Hindsight suggests the gradual approach might have been the wrong move: had we made the transition all at once in January 2020, the unit price of our fund would have increased by nearly 4% over three years. This is also the primary reason behind the difference in returns between our fund and the SEB index fund, despite the similarity in their portfolios.(3)

However, it is important to remember that investing is a long-term process subject to unpredictability. A wise approach to decision-making is to make changes incrementally, in small steps. This strategy minimises the risk of regrettable decisions requiring hasty reversals.

Assets are approaching 600 million euros

The number of people investing in index funds continues to grow steadily. July was particularly promising, with 16 million euros from new pension savers added to our second pillar funds by the end of the second exchange period. Tuleva’s World Stocks Pension Fund will likely rank among the three largest in Estonia in terms of assets by year-end.

While the size of our funds isn’t a goal in itself, larger asset volumes translate into better terms for Tuleva investors. Unlike banks, all our funds have very low fees, and an increased fund size can only further reduce these fees.

Our actual growth rate is affected by factors that are beyond our control. In the current year, state compensation to second pillar contributions and market growth have collectively boosted our assets by nearly 95 million euros. On the other hand, those who chose to exit – whether by transferring their assets to another pension fund or withdrawing from the second pillar altogether – reduced our assets by almost 15 million euros.

Tuleva’s growth engines: contributions from current and new second pillar savers

Our mission at Tuleva is to assist more and more individuals in building future capital by regularly setting aside small amounts. Thus, it’s vital that the primary driver of our growth remains increasing monthly contributions from our current pension savers.

In the past six months, our contributors have bolstered their pension accounts by more than 40 million euros. Notably, 50% of these contributions were directed to the third pillar, which has experienced a 20% upswing within the year. With third pillar contributions, people can significantly boost their savings rates.

Second pillar growth requires deliberate effort

We knew from the outset, when founding Tuleva, that the majority of Estonians’ financial wealth is concentrated in the second pillar. This serves as the cornerstone of achieving our mission: the true value of Tuleva lies in assisting people in effectively building their savings in the third pillar. To ensure the sustainability of our efforts, it’s important that individuals transfer their second pillar to us.

Our market share of second pillar assets currently stands at less than 9% – a fraction of its potential. However, individuals are unlikely to transfer to a new fund without a compelling reason. The long-term impact of fees on returns often eludes even those with solid financial knowledge. Presently, less than 20% of the second pillar’s total assets are held in index funds.

Over six years, we’ve learned that there’s no chart, website, or email that can act as a magic bullet and instantly persuade pension savers to switch to index funds. What truly drives change is purposeful efforts to eliminate obstacles: we minimise information overload, simplify the transfer, and provide guidance when people are ready to make informed choices. Having a friend or role model active within the Tuleva community, who can share all the relevant information, is better than any advertising campaign.

This is precisely what we strive to achieve through our product development, blog, emails, social media, customer support, and public appearances. In the early days, our team was tiny, consisting of just two full-time employees and a few assistants. This explains why our growth came at a remarkably low cost, while results fluctuated: with more time on our hands to invest, the results were outstanding; with less, they faltered.

Today, we have established a dedicated growth team, led by Erko in product development and Sten in operations. Our growth is now increasingly less reliant on my personal involvement, making it more sustainable. I’m confident that this approach will propel our growth rate to a consistently higher level.

We succeed when our savers reach their goal

We’ll reach 2.5 billion euros in assets once we have engaged 100,000 determined investors. These are individuals who have both their second and third pillar at Tuleva and contribute the maximum amount or, at the very least, 10% of their income to the third pillar. At this savings rate, these individuals stand a good chance of accumulating sufficient capital for retirement.

Currently, only 3,346 individuals are saving with such commitment. This represents just over 5% of all those who currently hold units in Tuleva’s pension funds – and this number has been slow to increase. This indicates that a significant majority of pension savers still lag far behind the savings commitment of a “determined” pension saver. How do we evaluate our progress in activating our savers?

There are two actions individuals can take to strengthen their commitment to savings:

Transfer your second pillar to Tuleva (or another index fund). Most individuals currently accumulate funds in their second pillar through high-fee bank funds, likely resulting in lower long-term returns compared to the global market. (2) Unfortunately, without substantial returns, it can be challenging to reach one’s desired accumulation goal.

Since the start of the year, 1,302 third pillar pension savers have also transferred their second pillar to us. This represents just over 6% of the full potential. The primary obstacle to transferring the second pillar seems to be hesitation, often expressed as the aversion to “putting all your eggs in one basket”. However, an index fund offers the most effective diversification, which is not improved by keeping money in another fund.

Contribute to the third pillar. In the first half of the year, 25,766 individuals made at least one payment to our third pillar fund, amounting to a total of 20 million euros and marking a 20% increase compared to the same period last year.

The most reliable path to achieving your savings goal is by setting up a standing order (also known as an automatic payment). By the way, you can now do this directly on our website, without having to navigate through online banking portals. Currently, almost 15,000 people have set up standing payment orders for Tuleva. Furthermore, if circumstances permit, consider increasing the amount of your standing order. Of those with standing orders, 13% have increased their amount in the first half of the year

New pension savers

The majority of Estonian residents have not yet heard of Tuleva or have yet to take that first step. However, this year, 3,482 new pension savers have joined our ranks. The influx of new savers often depends on the prominence of pension fund discussions in the public sphere. Our website and emails serve as valuable tools to help individuals navigate the information noise and make informed choices.

How do we reach new individuals when public discourse doesn’t revolve around pension reform? Remarkably, 80% of our new savers join us based on recommendations. When these recommendations come from respected figures in the financial industry, such as Kristi Saare or Indrek Seppo, it reinforces our belief that we are on the right path.

Even more frequently, however, recommendations come from friends, colleagues or relatives. The more people are willing to guide their social circle toward wise financial decisions, the sooner we can accomplish our mission.

Product development for a clear path

Our task is to ensure that anyone visiting the Tuleva website after a recommendation can navigate the website without running into any hurdles. We believe that 15 minutes should be enough time to launch a lifelong investment portfolio using the second and third pillars. In the first half of the year, 9% of new savers at Tuleva started by opening both a third and second pillar. We aim to increase this percentage significantly.

Low rate of leavers

Frequently switching between pension funds does not contribute to achieving better returns. In truth, it is more likely to have the opposite effect. We aim to maintain a churn rate below 3% of total assets. Currently, we have exceeded this threshold due to a somewhat higher number of second pillar withdrawals. Over the past 12 months, a total of 4.7% of assets have left the second pillar.

Tuleva’s financial performance is on track

An increase in asset volume leads to lower fees, provided we can control growth costs and reduce variable expenses. Throughout our six years of operation, we have successfully lowered fees for both fixed and variable costs, and we intend to continue this trend in the future.

While new hires initially increased our costs, our results over the past months have shown that this investment in growth is already paying off. Our income should cover our expenses and I believe this will remain the case in the second half of the year.

As always, the operating profit is supplemented by the revaluation of the pension fund units we own. In the first half of the year, this addition amounted to 0.6 million euros. It’s important to note that this is purely an accounting adjustment and doesn’t impact our economic activities

Two new team members

At the beginning of July, our new board member, Sten Andreas Ehrlich, began working with us. This brings the total number of board members to three. Sten is responsible for operations, while Erko Risthein, who joined the board in the spring, oversees product development and technology. Aside from being the third board member and chairman, I also handle investment strategy.

In August, our new office manager, Ketlin Veevo, joined our team. In addition to bettering the work environment, Ketlin also assists Pirje with customer support.

However, we still have an essential position to fill: the Head of Risk and Compliance. In the past, we have outsourced this role as a service. Given our significant growth, this approach has outlived its usefulness. However, regardless of this growth, the role does not currently require a full-time position. We have recently begun a public recruitment process, and we are optimistic about finding a qualified part-time professional by autumn. We welcome any recommendations or suggestions for potential candidates!

Next steps

In the second half of the year, our efforts will focus on activating our current pension savers, helping our savers overcome any hesitations in transferring their second pillar to Tuleva, and providing the right incentives to maximise contributions to the third pillar.

(1) All data on pension funds are from Pensionikeskus.ee as at 31 July 2023.

(2) See, for example, the S&P analysis here and the comparison of Estonian second pillar pension funds with index funds here.

(3) I am currently working on a blog post about the differences between index funds. The five stock index funds available to Estonian second pillar contributors also differ slightly in terms of portfolio composition principles, which can lead to differences in short-term performance.

(4) The chart compares Tuleva’s World Stocks Pension Fund, the LHV L Pension Fund, the Swedbank Generation 1970–79 Pension Fund, and the SEB Progressive Pension Fund. I conducted this analysis on 23 August 2023, a few days after my 50th birthday. I couldn’t find a recommendation for my age group on Luminor’s website. Interestingly, the recommendations of a bank tend to change drastically once you mention that you’re saving with Tuleva. Initially, they may suggest their high-fee fund, but once you mention Tuleva, they suddenly remember that they too can offer an index fund.

(5) My trusted source for the history of global financial markets is the data collected by Paul Marsh, Mike Staunton, and Elroy Dimson of the London Business School, published annually as the Global Investment Returns Yearbook. Unfortunately, Credit Suisse, which owned the rights to publish this book, ceased operations this year. I hope this valuable data will continue to be published by other entities in the future.

In May, MSCI, the world’s largest compiler of stock market indexes, included the first Estonian company, Wise plc, in its global equity market indexes. As a result, Wise shares were added to our pension fund portfolio. Interestingly, just a few months earlier, MSCI had removed Western Union, a company operating in a similar sector but with an outdated business model.(1)

A stock market index is essentially a list. The MSCI ACWI index, which we follow, comprises approximately 3,000 of the world’s largest listed companies ranked in terms of market value. The relative share of each company in the index is its market value divided by the total market value of all the companies in the index. (2)

MSCI reviews the list quarterly, adding companies whose market value has increased sufficiently to qualify as one of the largest and removing companies that have consistently fallen below a predetermined minimum value. (3)

Wise in, Western Union out

During the May revision, 86 companies were added to the ACWI index, while 39 were dropped. Notably, Electrolux shares were among those removed. In an interesting twist, in February, Western Union, a former heavyweight and rival of Wise from ages past, was excluded from the index. The company’s market value had dwindled to €4 billion, rendering it too small to remain in the index.

This is how passive investing works. Growing companies are included in our portfolio, while those performing poorly are eliminated. Find out more about what one index fund is doing to ensure future capital growth.

Important information on conflicts of interest

But wait, why am I even bothering to talk about the addition of just one stock to Tuleva’s portfolio? I mean, they add and remove stocks all the time, right? Well, let me tell you straight up: Tuleva and Wise are like peas in a pod! They’ve got more in common than meets the eye.

Taavet and Kristo, founders of Wise, are among our founding members, and Kristo also serves on Tuleva’s supervisory board. This connection is not coincidental. Wise emerged from the same frustration that led to the establishment of Tuleva. They are combating hidden fees imposed by banks for currency exchange and international payments. Similarly, Tuleva aims to challenge high government fees and concealed costs associated with pension funds, allowing Estonian people to save money for themselves rather than the banks.

It was only natural for Kristo and Taavet to support pension system improvements and participate in building a startup that belongs to the Estonian people. I am delighted that the connection now goes both ways. It is only fitting for a progressive financial company to be part of Tuleva’s investment portfolio.

I personally hold some Wise shares in my trading account. A few years back, I received 200 shares as one of Wise’s first customers (my username is number 7). I also went ahead and bought some more shares on the stock exchange last year. And since the end of last year, I have been serving as a proud member of the supervisory board of TINV Europe AS, a subsidiary of Wise.

This raises a valid question: Why do I buy individual shares? I follow Jack Bogle’s advice: allocate 90% of your funds to an index fund and invest the remaining 10% in a trading account, using it to make bold strategic moves. While I’m passionate about financial markets and deeply interested in company reports and analyses, the money in my trading account represents less than 5% of my total holdings in index funds.

Our other board member, Erko, is also no stranger to the world of Wise. Back when Wise’s market value wasn’t sky-high, Erko spent over two years working there and was lucky enough to receive a decent chunk of stock options along with his salary. Although those Wise shares turned out to be the shining star in Erko’s portfolio, he doesn’t consider himself an investing prodigy – just a darn good engineer who happened to strike gold by working for an amazing company like Wise.

But what really ties us to Wise is the fact that they’re an Estonian initiative. Whenever we spot a big news story about an Estonian financial company making waves in the Financial Times, our hearts swell with pride. And this time, it’s not some scandalous tale about banks laundering money.(smiley)

Of course, what’s also crucial is that the decision to include Wise in our portfolio wasn’t made by me or anyone else at Tuleva. It was MSCI following its own set of rules for compiling the index that made the call.

(1) You can find the MSCI announcement regarding the inclusion of Wise here.

(2) To clarify, shares in more than 30,000 companies are traded across the world’s stock exchanges. The MSCI ACWI, however, sets a practical limit by focusing on the 3,000 largest companies. Companies falling below this limit would have a negligible impact on the overall composition of the index.

(3) The composition of the MSCI index can be explored in a more detailed (and much more complex) discussion available here.

In spring 2016, 22 Estonian entrepreneurs and public figures came together with a shared commitment to make pension savings more profitable for Estonians, and just like that, Tuleva was born.

In just a few months, Tuleva was joined by 3,000 members, turning the dream of better pension funds into a reality. Today, more than 63,000 savvy individuals* are already contributing to their pension savings in Tuleva’s modern, low-cost pension funds.

If you work in Estonia, 6% of your monthly salary is likely to be allocated to a second pillar pension fund (1). Opt for a low-cost fund today – the lower your fees, the more substantial your pension savings.

Choose a fund at Tuleva because the more individuals who collectively save for their pensions, the greater the advantage for everyone involved.

If you can spare just a moment,

let me tell you this:

Tuleva is not just good, it’s great for you!

Tuleva offers some of the most cost-effective pension funds in Estonia, with a total expense ratio 0.32% (updated 19.11.2024).

Tuleva is as safe as a bank fund.

It goes without saying that Tuleva’s clients enjoy all the same rights and guarantees as clients of bank pension funds. We are supervised by the Financial Supervision Authority, and the assets of our members are always held separately from the fund manager’s funds in a custodian bank, Swedbank. Furthermore, the national guarantee fund protects investors in all second pillar pension funds against the worst outcomes.

Tuleva World Stocks Pension Fund

is suitable for you if you are aged between 18 and 55 or still a long way from withdrawing your pension assets. This fund is favoured by most of the members and founders of Tuleva.

Tuleva World Bonds Pension Fund

is a conservative option that may be the best choice for you if you have only a few years left until retirement or prefer to have minimal exposure to stock market fluctuations.

Transferring your pension to Tuleva is free and takes just a few minutes – find the instructions here: 

Transfer your pension to Tuleva

Closeup: What’s inside the Tuleva fund

Tuleva funds are low-cost and follow clear rules when investing in the shares of the world’s largest companies and government bonds. Our investment strategy involves diversifying the risks over space and time, rather than seeking to outwit the market. When markets soar, the value of your investment portfolio rises while the new fund units you acquire through your monthly contributions also cost more. Conversely, during market downturns, you acquire new units at a lower price, compensating for the fluctuations

This approach is known as passive investment, and it is highly regarded by economists worldwide as the most sensible strategy for pension savers. Why? Because, in eight to nine cases out of ten, passive investment strategies have outperformed active fund management in the long run. (2)

To get the most out of Tuleva, transfer all the units in your existing pension fund(s) to Tuleva and redirect future contributions. No one knows which fund will provide the best return over your lifetime, but you can be sure you’ll save as much as possible on fees, and those savings will, in turn, earn you a return over time. Many of the Tuleva team and founding members, including myself, have already transferred all their pension assets to the Tuleva World Shares Pension Fund

Tuleva World Stocks Pension Fund

Inside the Tuleva World Stocks Pension Fund, we allocate 100% of the received funds into shares. (3)

We distribute the fund’s cash inflows between three index funds tracking the stock market of the developed world. Why do we use three essentially identical funds? The law restricts pension funds from investing more than 30% of their assets in a single index fund.

Here’s how we invest the funds:

29,5% in iShares Developed World ESG Screened Index Fund

29,5% in CCF Developed World ESG Screened Index Fund

22,6% in iShares MSCI USA ESG Screened UCITS ETF

7.6% in iShares MSCI Europe ESG Screened UCITS ETF

0.8% in iShares MSCI Japan ESG Screened UCITS ETF

Feel free to click on the links to explore these funds in detail and review their performance.

The remainder of our fund’s equity investment is allocated to an index fund tracking the stock markets of developing countries:

10% in iShares Emerging Market Screened Equity Index Fund (IE)

Why is this fund separate? This is because the management fee for a global index fund is higher than the sum of its individual components. This difference is particularly pronounced when comparing large markets (developed countries) with smaller markets (mostly developing countries)

It is important to note that while our funds are listed in euros, they include assets that may be listed in US dollars, Japanese yen, or other currencies. Therefore, fluctuations in currency exchange rates can impact the value of these assets in euro terms. And the other way around.

Although currency risk funds are available to Tuleva, we choose not to invest in them. Currency fluctuations are not a primary concern for pension savers. Historically, hedging currency risk has neither gained nor lost anything for the average long-term saver. Since currency hedging involves costs, we follow our principle of avoiding expenses that do not create value for the pension saver.

In September 2022, we implemented a change to exclude nearly 200 companies that do not meet sustainable and responsible investing (ESG) criteria from the list of the world’s largest 3,000 companies. This adjustment aligns with our portfolio’s main objective of achieving global market average returns while taking steps to consider and reduce the negative impact of our investments on the environment and society.

Tuleva World Bonds Pension Fund

Our second pension fund, the Tuleva World Bonds Pension Fund, adopts a conservative approach and does not invest in shares. The law requires every pension fund manager to offer, among other things, a fund that caters to individuals who cannot afford fluctuations in the value of their pension fund units while aiming for potential growth. This fund provides pension savers with the opportunity to secure their pension savings effectively. If you are nearing pension age and plan to withdraw your accumulated funds soon, this fund might be suitable for you. Additionally, you may consider transferring assets to a pension investment account rather than a bond fund to avoid potential loss in asset value. Keep in mind that although bond funds experience fewer fluctuations compared to equity funds, changes in interest rates can still impact the value of assets.

For individuals who experience anxiety about investment fluctuations, it’s important to remember that saving small amounts for your pension allows for a nicely diversified portfolio, reducing concerns about short-term fluctuations. Jack Bogle, founder of Vanguard Index Funds, recommends adopting a ‘don’t peek’ approach with your pension account. However, if you find it difficult to stop yourself checking, a bond fund might be a suitable choice. Keep in mind that panicking during a market downturn can be detrimental to your investments. If you prefer to avoid investment risks altogether, you can keep your assets in a deposit. In the case of the second pillar, this is how you can put assets into a pension investment account and keep them there in cash.

Within the Tuleva World Bond Fund, we allocate half of the funds to the Bloomberg Barclays Global Aggregate Bond Index and the other half to the Bloomberg Barclays Euro Aggregate Bond Index. This approach serves two purposes.

First, spreading the investments across bonds denominated in different currencies reduces the overall risk, which is achieved through the global index. Second, short-term fluctuations in currency exchange rates can impact the euro prices of funds tracking the global bond market index. To mitigate this currency risk, a portion of the fund is invested in a euro-denominated bond index fund.

Our risk-hedging strategy is straightforward: when in doubt between the two approaches, we adopt a balanced approach by allocating funds equally between the two indexes.

To track the euro-denominated bond index, we use two funds:

25% allocation to iShares Euro Aggregate Bond Index Fund

25% allocation to iShares Euro Government Bond Index Fund

As a result, our fund exhibits a slightly more conservative stance compared to the overall index due to its higher proportion of government bonds

To track the global bond market index, we use:

25% allocation to iShares Global Government Bond Index Fund

25% allocation to iShares Euro Credit Bond Index Fund

The second fund focuses on euro-denominated bonds issued by companies worldwide, thereby reflecting a stronger inclination towards the euro area. As our fund expands, there will be ample opportunities to align more closely with the global market while still maintaining a cost-effective approach.

Tuleva pension fund fees will always remain among the lowest in Estonia

Ongoing fees, also known as the total expense ratio, for our funds are below 0.5% per year. Why is this figure different from the 0.25% fund management fee for Tuleva pension funds?

Similar to purchasing a car, it’s essential to consider the maintenance costs when choosing a fund. As an investor, you should also factor in additional costs beyond the purchase price.

The pension fund reinvests the assets in other funds, each of which charges its own management fees. Transactions involving the fund’s assets also incur brokerage fees. These additional costs can have a significant impact on your overall investment returns, sometimes comparable to the pension fund management fees charged banks.

Essentially, the total expense ratio reflects the reduction in our pension fund’s return compared to the return on the indexes we track (after tax). The lower the total expense ratio, the greater the advantage for our investors in growing their wealth.

Put simply, the lower the cost, the higher your pension.

Following the launch of the Tuleva pension funds in 2017, the Estonian state compelled other pension funds to substantially reduce their fees. Even after this, the expenses of the Tuleva equity fund remain nearly three times lower than those of larger equity pension funds like LHV L and XL, SEB Progressive and Energetic, and Luminor A and A Plus pension funds. (4)

It is crucial to monitor your ongoing costs, or the total expense ratio of ownership, as the management fee alone tells only half the story. You can access the ongoing costs of the funds through the Pension Centre, and the Tuleva calculator provides the total expense ratio for your fund.

Our bond fund currently has costs similar to the two best-performing funds on the market: Swedbank Pension Fund Conservative and SEB Conservative.Costs are particularly important for bond funds, where returns are limited. The average rate of return on bonds in a typical Estonian conservative pension fund portfolio is less than 1% per year after tax. If the expense ratio of such a fund approaches or exceeds 1%, you end up paying the bank your entire profit.

Personally, I transferred all my second pillar pension assets to the Tuleva World Equity Pension Fund. I exchanged all the pension fund units I had accumulated thus far for units in the Tuleva fund and directed my future contributions accordingly. Kristi Saare, Community Manager of Tuleva and founder of the Club of Women Investors, has also taken the same step. Many of the Tuleva founding members have joined us.

Wishing you the best in saving for your pension,

Tõnu Pekk, Tuleva Founder and Fund Manager

[email protected]

(644 5100)

NB This article is Updated 19.11.2024. We updated the number of pension savers in Tuleva and how much we reduced our fees. 

You can find the current model portfolio here (in Estonian).

(1) If you were born before 1983, you had until October 2010 to choose whether or not to save in the second pillar.

(2) According to S&P, 91% of US equity funds have underperformed the index over the past decade. You can also access S&P’s more detailed report with comparative data on euro-denominated funds.

(3) Prior to 2019, the law limited the pension fund’s equity allocation to a maximum of 75%. Consequently, our fund allocated the remaining funds to bonds issued by the world’s largest governments. Today, this restriction no longer exists and we no longer purchase additional bonds. We have gradually sold existing bonds and exchanged them for shares, resulting in a complete shift to a share-based portfolio by the beginning of 2023.

Starting from 1 September 2022, we have adopted the principles of sustainable and responsible investment, excluding companies that do not meet our criteria from our portfolio. Apart from this change, there have been no other modifications. Read more here.

(4) See comparison of ongoing fees at the Pension Centre.

To review the terms and conditions of our funds, click here and here. If you require advice, feel free to consult an expert.