Main safeguards of members laid down in legal acts of the Republic of Lithuania
Protection from the pension company and its creditors
Assets of the pension fund is the shared ownership of members. These assets are separated from other assets of the pension company and assets of other pension funds managed by the same pension company. Assets of the pension fund are held at the depository. The pension company manages, uses and disposes of pension assets on the basis of trust, so creditors of the company have no rights to the assets of the pension fund.
Protection from bankruptcy of the pension company
If a pension company managing pension fund assets went bankrupt, an administrator appointed by the court would transfer all assets of pension funds into management of another pension company under the procedure laid down by the Bank of Lithuania.
Every member would be able to choose another pension company and all his or her savings in the pension fund would be transferred to that company. Since assets of the pension company are separated from assets of pension funds managed by it, a bankruptcy of the pension company does not affect the amount of savings of members.
Protection from major impairment of investments
We have put in place a number of safeguards helping avoid major impairment of investments. One of them is diversification of investments: according to the laws regulating pension accumulation activities, assets of a pension fund must be invested in a variety of investment instruments, asset classes, regions or sectors. Moreover, investments can only be made in certain investment instruments of specified countries and they must be distributed in the relevant proportions, etc.
Managers of pension funds are professional investors. Therefore, assets of pension funds held in deposit accounts are not covered by deposit insurance. Still, legal acts impose prudential requirements that the maximum maturity of deposits held by pension funds should be 12 months. Moreover, the total value of deposit agreement concluded in a single credit institution may not exceed 20% of the value of fund's assets. In this case, as in many other cases related to the protection of fund members, we have imposed even tighter requirements as deposit agreements can only be concluded with proven and reliable credit institutions.