There is a characteristic in the financial markets that has not changed for decades: downturns are always followed by upturns, and upturns are followed by downturns. This is precisely illustrated by the performance graph of the SEB -Active plan. The same also applies for the results of the SEB - Balanced plan.
We have experienced higher or lower declines before – in 2015, 2018 and 2020. They affect both the pension plans managed by SEB, as well as pension plans managed by other pension managers. This is a natural feature of the financial market, which is affected by a wide range of developments in the financial markets, from central bank policy, inflation, national growth rates to the performance of various companies.
This trend continues also today. The year 2021 was very successful – after a fall in March 2020 caused by the spread of COVID-19, we experienced a rapid increase in value for almost 2 years. The last year was also successful for the 3rd pension pillar plans of SEB. The 1-year return from the SEB - Active plan was 10%, while the 1-year return from SEB - Balanced plan was 4.45%. More information is available in the reports of pension plans.
But the year 2022 has begun with a decline. All around the world habits of people are changing, the characteristics of the “remote economy” are changing and investors are shifting from technology companies to other sectors. Moreover, this time is also tense from a geopolitical point of view due to the tension in relations between Russia and Ukraine. Unfortunately, military conflicts are constantly happening in some of the regions of the world. Several of them have occurred in the Europe as well (Ukraine, Georgia). This has a short-term impact on the results of the financial markets and also pension plans.
No one can avoid short-term declines, but the best way to keep your savings from decreasing is to choose an age-appropriate pension plan and make regular contributions. However, if the age of 55 years has been reached and you plan to use the accumulated funds in the near future, please consider whether the moment of recession is the best time to do so. Withdrawals at the time of a market downturn can result in permanent losses, as the savings do not have the opportunity to recover. Please carefully consider the possibility of continuing to save your pension in the 3rd pension pillar in order to await a recovery in the financial markets and also an increase in your savings.
We remind you that the results of pension plans must be evaluated in the long term. According to publicly available information at www.manapensija.lv, the profitability of SEB's pension plans is the best in the plan category, both in terms of 1-year and 10-year returns. Industry data available - History and statistics | My Pension
Your pension manager Jānis Rozenfelds
There is a feature in the financial markets that has not changed for decades now: downturns are always followed by upturns, but upturns are followed by downturns. Larger or smaller falls have also been experienced several times in the very recent past: in 2015, 2018 and 2020. They are experienced both by SEB and pension plans offered by Latvian financial market participants. This is a natural feature of the financial market, which is affected by a wide range of developments – from central bank policy, inflation, and national growth rates up to the performance of various companies.
This trend continues even today. The year 2021 was very successful – after a fall in March 2020 caused by the spread of Covid-19, we experienced a rapid increase in value for almost two years. The year 2021 was also a successful year for SEB pension plans. The year 2022 was a year of significant change and, unfortunately, this change was not always positive, with an impact on the economy and financial markets as a whole, as well as on each of us individually. The year 2022 started with a fall in financial markets, as investors switched from technology companies to other sectors, and continued with Russia’s invasion of Ukraine. In parallel, central banks changed their policies significantly, raising base interest rates. Also, Covid-19, especially in Asia, significantly affected and continues to affect the world economy. As a result, almost the entire year of 2022, with the exception of March, July, October and November, was negative. This affects the results of the financial markets and also pension plans in the short term.
No one can avoid short-term declines, but it should be taken into account that stopping contributions or terminating the contract at the time of a market decline can result in permanent losses, because then the savings are denied the opportunity to recover. It is also important to remember another important factor in building up savings – the long term. Most often, savings are built up over several years, even decades, so the impact of short-term fluctuations is not always as significant as it seems at the time we experience it.
Your pension manager Jānis Rozenfelds
13.02.2023.