In case you have more than 10 years to pension age, then we recommend to follow these two principles when saving for pension:
Your pension savings should be invested in the asset class with a maximum expected return. For our pension savers that asset class is shares in companies. So you should keep your money in a pension fund with maximum proportion in shares i.e. aggressive strategy funds.
Among those funds that satisfy point 1, choose the lowest cost funds. Historical data shows that the fund cost ratio is the best predictor of long-term returns. The higher the expenses, the lower the return, and vice versa.
If you have less than 10 years until retirement, then it makes sense to consider conservative funds or using pension investment account to keep your II pillar as deposit. Even though such conservative funds are expected to return less, the value of their shares also fluctuates less then stocks.
Log in to your pension account on our website, and you can bring both your second and third pillars to Tuleva with a few mouse clicks.
Yes, if you work and file your taxes in Estonia, you can open a pension account and start saving in II pillar. You can open the pension account on Tuleva website or in your internet bank.
There are two different applications for changing your second pillar fund:
1) a choice application, which directs your monthly pension contributions to a new fund and becomes effective immediately
2) an exchange of units application, which transfers your existing units to a new fund.
These applications are fulfilled three times a year on certain dates (1 May if the application is submitted before 31 March, 1 September if the application is submitted before 31 July, and 2 January if the application is submitted before 30 November).
We invest passively and keep costs very low. In this way, we achieve a fund performance that goes hand in hand with world markets. Therefore, we can ensure that Tuleva pension funds’ performance will never lag far behind the average of the world securities markets.
No. This is not a good idea. This question has been analysed quite thoroughly in the world and the conclusion is: those people who try to time the market tend to buy when markets are at their peak and sell when at the bottom.
Many investors attempt to predict market movements but most often they do not succeed, even professional investors. This is one reason why Estonian pension funds have significantly underperformed world market average returns.
Remember that a market decline is not necessarily bad news for you. Most of us will be buyers of pension fund units for many years to come. A fixed amount of your salary goes to the pension fund every month and when the market is down, you will get more units for the same amount of money. So when the markets start to rise again, you will have more units that grow in value. This is called dollar-cost averaging. This works for you only in case you do not jump in and out of the funds, attempting to “step on the gas” or “decelerator” all the time.
The best way to protect yourself is to do nothing and stick to your strategy of low cost funds through both market boom and bust.Jack Bogle, the founder of the world’s largest fund manager Vanguard, recommends: “Put your money in a low cost index fund and don’t peek!” One of the world’s most successful investors Warren Buffett recommends: “Keep buying it through thick and thin, and especially through thin. The temptation when you see bad headlines in newspapers is to say, well, maybe I should skip a year or something. Just keep buying.”
Markets are cyclical – there is always a fall after a rise and vice versa. At least that’s how it has been in the past. When you save for your pension, you are a long-term investor. The past is no guarantee for the future, but at least history has shown that a long-term investor does not need to worry about market cycles.
Look at it this way: markets will fall. This is certain. Also, it is certain that nobody knows when it will happen. If you doubt this, try to find a fund manager or analyst who has precisely forecast all recent market crashes – in January 2000, autumn 2007 and summer 2011 and who recommended to buy shares in the intermediate period. There are no such people – some were too optimistic and lost money and others missed out on market gains because they were too pessimistic. All Estonian pension funds have underperformed the market average because fund managers have sometimes been too bold and sometimes too scared.
If you manage to avoid the temptation of making decisions based on short-term market fluctuations and keep smooth-talking salesmen and scaremongering bank tellers at bay, you will get the world market average returns for your investments. Over the long term, these returns have been higher than what most professional fund managers have achieved with their active buying and selling.
All Estonian pension funds’ risks are well diversified, that is required by law. A pension saver does not have to manage their risks by spreading money among many funds. In addition, a pension saver does not bear any business risk of the fund manager. That is why spreading your money among many funds does not reduce your risk.
The only way to reduce your risk is to put some part of the money into a conservative strategy fund e.g Tuleva World Bonds Pension Fund or Swedbank K1.
This could be a sensible choice if you have only a few years until retirement. It could also make sense if you are very sensitive to risks and short-term fluctuations make you really suffer. But you need to understand that there are no risk free returns – if you avoid risk, then you get no or very little return.
You can compare funds’ results on the Pensionikeskus website – you don’t have to invest into many funds to do that.
Learn the basic facts of long-term saving and decide, what is you strategy. You should change your pension fund when it turns out that your pension fund’s strategy is not aligned with your own saving principles. We (and most expects, like investment guru Warren Buffett) recommend that you follow two main rules:
Yes. Your money is protected in addition to Tuleva’s own internal rules and procedures by these three pillars:
Financial Inspection has issued Tuleva fund manager a license and is overseeing that our activities comply with its rules.
Swedbank is the depositary bank of Tuleva pension funds. Depositary bank confirms every transaction made with the fund`s assets. Exactly the same way as with the bank`s own funds.
State guarantee fund protects all pension fund investors against the worst, in case the fund manager’s fault has caused damage to the fund
It might seem unbelievable, but in reality only a quarter of the management fees of a bank’s fund will go towards handling the assets. Fund managers will channel the rest of the money to the parent company for cost of sales and profit. These expenditures will not create any value to us, the pension savers. If we minimize those charges, it is really not that difficult to start a low-cost pension fund.
Tuleva started with managing pension assets of 3000 people. Every pension fund has fixed costs that decrease proportionally as the fund’s volume increases. So, the more people bring their savings to Tuleva, the cheaper we can take care of our assets. In other words, when Tuleva’s funds grow bigger, the management fees will drop even more.
If you have any questions, please contact 644 5100 or [email protected]. Saving for your pension is one of the most important things to do when thinking about your future. Unfortunately, the pension system has been made rather difficult to understand – don’t hesitate to ask further information.
If you want to know more about Tuleva’s story and goals, the association or how to become a member, start here.
The world's leading analysts have determined that fees are the surest predictor of returns: the lower the fees, the better prospects for growth. (And higher fees correlate with poorer results.)
Expected returns depend greatly on the evolving rate of return, and neither we nor anyone else are able to guarantee a 5% annual return.
In a low-cost index fund your assets grow hand-in-hand with the average returns of world markets. Low-cost index funds have outperformed Estonian pension funds every year to date, but past performance is no guarantee of future performance.
Funds' average annual return before management fees
Average annual salary growth
Minimum eligible age
issued a licence to Tuleva fund manager and controls that our everyday operations comply with regulations.
is Tuleva pension funds’ depositary bank. Depositary bank approves every transaction with fund’s assets. Exactly like with bank’s own funds.
protects all pension fund investors against the worst in case fund manager causes harm to investors.
Membership fees are used to develop the Association and to represent the interests of members. The fees of our first members were used to raise the fund’s initial capital, introduce Tuleva to the general public, and make preparations to start the fund, including application for an activity license from the Financial Inspectorate. From this point forward, membership fees will be used for the following activities:
Every euro saved gives a Swede almost a third higher pension than the same amount saved by Estonians. Estonia needs a smarter and measurable pension strategy.
As the first and only association representing pension savers, Tuleva is a credible partner for Ministry of Finance and state legislative bodies. We participate in pension strategy discussions, where next to the officials only banks and insurance companies used to be represented.
We help to make better laws. The laws that protect the people. The laws that maximize our profits from our, not banks’ savings.
We have our first achievements. For example
We do not organise demonstrations or spread random complaints. We are direct, we analyse issues and offer constructive solutions.
Tuleva’s main principle is that people themselves save money for their future, using contemporary technologies and bypassing unnecessary middlemen and costs as much as possible.
Every year, each member who has transferred their second or third pillar to Tuleva pension funds, earns a member bonus. Member bonus is very small at first, but it will grow together with member’s pension assets. Bonus is transferred to your personal capital account at Tuleva. This is your ownership stake in Tuleva capital and this stake can earn you additional profit.
When Tuleva grows, our funds under management grow and we add new products to our offering, then the association will earn profit. The profit is then divided among members, as set in our Articles of Association.
As always with profit from entrepreneurship – this depends how well our venture is doing. The founders are convinced, that the 125-euro joining fee pays for itself many times over. But we do not give promises.
At the end of each year
Every member has a vote on annual general meeting and has a right to elect and be elected to Tuleva’s board of directors and other supervisory bodies. This is the official part and it is very important.
Every day we share our ideas and experience among Tuleva members in our Facebook group, e-mail, phone and working groups. Among our community, there are people who care about the society and have very different skills. Many are ready to take responsibility for ensuring us a better future.
Tuleva team listens very carefully to our members and uses their ideas for making Tuleva better. We are only starting and believe that the power of thousands of smart people can be used for increasing our common good.
Tax benefit is simple: the government pays you back the income tax on your third pillar contributions. Tax benefit applies to contributions that do not exceed 15% of your gross income or 6000 euros, whichever is smaller.
Your maximum contribution amount to third pillar is thus 15% x gross annual income. If your annual income is over 3333 euros per month (gross), then you can contribute to third pillar 6000 euros.
Tax benefit equals 20% x your third pillar contributions.
NB! Your tax benefit cannot be bigger than the income tax you have paid during the year. Thus: if your gross income is less than 614 euros a month, then your maximum contribution is less than 15% of your income. More precisely – your maximum contribution per month is then: gross monthly income x 0.964 – 500.
With less than 519 euro monthly income you are not paying income tax most likely and hence you do not have any tax benefit in contributing to third pillar.
If you know that income is still coming to your account this year, add it yourself.
Please note that all income that reaches your account this year will be included in the calculation for this year (if the December salary is received in January, it will be included in the next year’s income calculation).
You can also add income that you plan to declare in the income tax return this year: rental income, interest paid by crowdfunding portals, income from the transfer of securities or other property.
Don’t worry if you don’t know the exact amount of your annual gross income today. Calculate the approximate amount and then find the optimal third pillar money placement with the calculator. If the actual annual income turns out to be higher than expected, your contribution will simply be slightly below the income tax allowance limit. Nothing terrible will happen even if you put a little more than the tax credit limit in the third pillar. The law does not prohibit it – if you exceed the limit, you simply cannot get the income tax back.