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Pension annuity payment

Pension annuity is a periodic pension payment of the funds accumulated in a person’s pension accumulation company paid by "Sodra" (the State Social Insurance Fund Board) until the end of life. "Sodra" guarantees that monthly payments will not decrease over the entire payment period. This service may be acquired as from 1/07/2020 by those involved in the additional accumulation of pensions (2nd stage).

 

Features of pension annuity:

  • Guaranteed regular income each month.
  • The amount of payments for accumulated funds does not depend on the situation on the financial markets, there is no investment risk. 
  • Payments for accumulated funds are tax-free.
  • Income is received throughout life.
  • There is an opportunity to inherit a part of the amount.
  • State guarantee.
  • Pension annuity cannot be declining.

 

Important:

  • The money paid for the acquired pension annuity is the property of the pension annuity fund.
  • After the acquisition of annuity a pension annuity may be withdrawn only within 10 working days after "Sodra" has submitted a decision on the payment of the pension annuity. It can no longer be abandoned at a later date;
  • It is not possible to receive the full amount due in a single payment, except when the remaining amount is paid to the heirs.
  • Pension annuities under contracts concluded before 1 July 2020 will be paid by life insurance companies under contract terms until their due date expires, i.e. for the rest of their lives. This means that contracts previously concluded with life insurance companies for the payment of a pension annuity will remain in force.

 

You can acquire one out of three pension annuity types in "Sodra". Having chosen the type of pension annuity, you will not be able to change it later (if you do not change your mind within 10 working days from the date of the pension annuity payment decision and do not withdraw the offer).
 

Standard pension annuity

It shall be purchased for the total amount accumulated in the pension fund. The State guarantees that "Sodra" will pay regular periodic pay-outs until the end of life. 
 

The amount of the accumulated pay-out is calculated according to the amount of your accumulated money in the pension fund and the average life expectancy of all pension annuity recipients. Payments of accumulated funds are not hereditary – the payment of benefits ends in the event of the death of a person.

This type of payment will ensure higher payments than other annuity types.

Standard pension annuity:

  • Maximum monthly payments
  • Stable income every month
  • The amount of payments does not depend on the country’s economy and the situation in the financial markets
  • Payments are tax-free
  • Income is received throughout life
  • There is no possibility of inheritance
  • State guarantee
  • The pension annuity cannot be degressive

 

Standard pension annuity with a guaranteed payment period

It is purchased for the total amount accumulated in the pension fund. The State guarantees that "Sodra" will pay regular periodic pay-outs until the end of life. Partial inheritance is also guaranteed if the person dies before he/she reaches the age of 80. 

For example, if a person dies at the age of 70, a lump-sum for accumulated funds that would have been paid out in the 10 years before the person’s 80th birthday will be calculated and paid to the heirs.

The calculation of the lump-sum for heirs assumes that this money will no longer be invested and that there will be no return on investment on which the amount of pension annuity payments depends, ie the lump-sum may not coincide with the amount of pension annuity payments for the relevant period.

Standard pension annuity with a guaranteed payment period:

  • Lower payment than a standard pension annuity
  • Stable income every month
  • The amount of payments does not depend on the country’s economy and the situation in the financial markets
  • Payments are tax-free
  • Income is received throughout life
  • Inherited lump-sum for unpaid pension annuity payments up to 80 years
  • State guarantee
  • The pension annuity cannot be degressive

 

Deferred pension annuity

It is purchased for the part of the accumulated amount in the pension fund, depending on your age. The State guarantees that Sodra will start paying pension annuity payments only when you reach the age of 85 and will pay pension annuity payments on a monthly basis until the end of life. The remaining part of the pension fund continues to be invested and paid out in periodic payments until you reach the age of 85.

Important:  periodic payments from the accumulated amount of the pension fund up to the age of 85 shall be paid by pension accumulation companies. You shall contact your pension accumulation company on the terms of these payments.

 

Important:

The amount of payments payments by the periodic pension accumulation company varies depending on the investment performance of the pension fund and the situation on the financial markets. Each payment may be smaller or bigger than the previous payment. This part of the funds remains the property of the pension participant and is therefore inherited – in the event of the death of the person, the remaining amount, which had not yet been paid, goes to the legal heirs.

Since Your 85th birthday, "Sodra" starts paying the deferred pension annuity and the State guarantees that "Sodra" will pay regular periodic pay-outs until the end of life.

 

The main features of periodic payments paid by a pension accumulation company are the following:

  • Paid up to the age of 85
  • The amount of periodic payments may decrease or increase;
  • Unpaid amount of the pension fund is hereditary.

 

The main features of the pension annuity paid from the age of 85 are the following:

  • Stable income every month;
  • The amount of payments does not depend on the country’s economy and the situation in the financial markets
  • Payments are tax-free
  • Income is received throughout life
  • There is no possibility of inheritance
  • State guarantee
  • The pension annuity cannot be degressive

 

Calculation of the amount of pension annuity

The amount of pension annuity is calculated according to the methodology approved by "Sodra":

  • The amount accumulated in your pension company for which pension annuity benefits will be paid.
  • The type of pension annuity you have chosen.
  • The average life expectancy of all pension annuity recipients.
  • Interest rate.
  • Administration expenses.

 

The principles set out in legislation that "Sodra" must follow:

  • The amount of pension annuity cannot be descending.
  • While making the decision on the payment of a pension annuity, it is prohibited to request and use personal health examination data in any form.
  • While calculating the size of pension annuity, "Sodra" cannot take gender into account.

 

Comparison of pension annuities

Feature

Standard

Standard with guaranteed payment period

Deferred

Amount of benefit

Largest

Smaller

Smallest

Income

Stable every month

Stable every month

Periodic payments are variable, income stable from 85 onwards, monthly

Amount of benefit

Independent of the country's economy, situation in financial markets

Independent of the country's economy, situation in financial markets

Periodic payments depend on the economy of the country, the situation in financial markets

Benefits

Non-taxable

Non-taxable

Non-taxable

Income

Income gets the rest of your life

Income gets the rest of your life

Income gets the rest of your life

Inheritance

There is no possibility of inheritance

Inheritance benefits under the age of 80

Periodic benefits under 85 years of age are inherited; pension annuity benefits are not inherited

Assurance

State guarantee

State guarantee

State guarantee

Amount of benefit

Cannot decrease

Cannot decrease

The amount of the periodic benefit may decrease or increase; the amount of the pension annuity benefit may not decrease

 

​Is it mandatory to acquire a pension annuity?

Yes, if you have accumulated EUR 10 000 or more in the Tier II pension fund. However, if the accumulated amount exceeds EUR 60 000, the excess may also be paid in a lump sum.

No, if you want to defer the purchase of a pension annuity (in which case the accumulated funds remain with the Pension Fund).

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MYTH 1: Assets for the acquired pension annuity ‘go‘ to Sodra for the payment of allowances and other social benefits

Contributions received for acquired pension annuities are managed in a separate Pension Annuity Fund, which is administered separately from other assets managed by Sodra.

The Law on the Accumulation of Pensions determines the purpose for which the assets received for acquired pension annuities can be used: payment of pension annuities, coverage of administrative costs (one-off deduction of no more than 3 percent from the contribution), investment, and making other legitimate payments that are related to the activities of the Pension Annuity Fund.

MYTH 2, WHICH IS PARTLY TRUE: Pension annuity paid by Sodra will be of the same amount throughout the life

The Law on the Accumulation of Pensions lays down that pension annuity paid by Sodra cannot decrease. The Pension Annuity Fund invests the assets received and, depending on the investment results, pension annuities can be increased from distributed profits in the future. 

MYTH 3: Upon reaching retirement age, the pension fund member must immediately acquire a pension annuity, if he has accumulated 10 thousand euros and more

The law does not provide for an obligation to immediately acquire a pension annuity upon reaching retirement age, if the member has accumulated 10 thousand euros and more. For example, a working person who has reached retirement age may continue paying contributions to his pension fund in order to accumulate a larger amount for the future. If a person does not acquire a pension annuity until the end of his life, the total amount accumulated in the pension fund is inherited in accordance with the procedure established by the Civil Code.

MYTH  4: After the acquisition of a standard pension annuity with a guaranteed payment period, pension annuityb is only paid until the age of 80 years

After the acquisition of a standard pension annuity with a guaranteed payment period, the pension annuity is paid all life. This type of pension annuity guarantees that a person will receive as many pension annuity benefits as the person would receive until he will turn 80 years old. That is, when the recipient of pension annuity will reach the age of 80 years, his inheritors will receive a one-off benefit for the remaining guaranteed period. If a person lives longer, he will continue to be paid benefits of pension annuity every month.

MYTH 5: Assets accumulated in the pillar II pension fund are inherited only as long as they are in the ‘bank’

There are pension annuities with a feature of inheritance. When a standard pension annuity with a guaranteed payment period is chosen, part of pension annuity would be inherited in the event that its recipient does not reach the age of 80 years.

MYTH 6: Inheritors will not receive the profit earned by the Pension Annuity Fund

If, after distributing the profits earned by the Pension Annuity Fund, a pension annuity was increased, the inheritance amount is calculated considering the increased pension annuity.

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You can choose from several payment options for the accumulated funds:

Accumulated amount, EUR

Possible payment methods

 

Lump-sum pay-out

Regular pay-out

Pension annuity

Less than 5000,00

Yes

No

Yes

From 5000,01 up to 9999,99

No

Yes

Yes

From 10 000,00 up to 60 000,00

No

 Yes, if a deferred pension annuity is selected 

Yes

Over 60 000,01

Yes, the amount, which exceeds EUR 60 thousand

 Yes, if a deferred pension annuity is selected 

Yes

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You will only be entitled to a pension annuity benefit for the amount accumulated in the pension fund after reaching the old-age pension age or if you are awarded or have already been awarded an early social insurance old-age pension.

Even after reaching the retirement age, you have the right to postpone the start of the acquisition of a pension annuity. If you do not apply to a pension accumulation company for the conclusion of a pension benefit agreement, you will be considered to have exercised your right to postpone the acquisition of a pension annuity. In that case, you will continue to participate in the accumulation of pensions.

This procedure shall also apply to other pension benefits from the amounts accumulated in the pension fund.

 

Where and what documents need to be submitted?

Check what amount you have accumulated in your pension fund. You can find out about this in your pension accumulation company. The choice of periodic payments or pension annuity will depend on this.

  • To receive a pension benefit, submit an application for a pension benefit agreement to your pension accumulation company.
  • If you have accumulated less than 10 thousand euros, apply to the pension accumulation company for a pension benefit agreement. This request can also be made in advance in "Sodra", but then it is urgent to submit an application within 3 working days for the conclusion of a pension benefit agreement to a pension accumulation company, otherwise the application for the acquisition of a pension annuity will be annulled. You will be able to submit it again at a pension accumulation company.
  • Upon receipt of your application for a pension benefit agreement, the pension accumulation company will convert the pension fund units belonging to you on the next working day into money and conclude a pension benefit agreement. If you change your mind, you can withdraw from this agreement within 10 working days of its entry into force, unless you have chosen a pension annuity (in which case the withdrawal period is longer). Your accumulated amount will be converted back into pension fund units and you will remain a member of the pension fund.
  • If you choose to receive a lump sum or periodic benefits, the pension accumulation company will pay them in accordance with its terms and conditions.
  • If you choose one of the proposed types of pension annuity, "Sodra" will calculate the amount of the pension annuity you own and will present your decision to you through your personal "Sodra" account to the resident on this website. You can opt out within 10 working days. In that case, your accumulated amount will be converted back into pension fund units, and you will remain a member of the pension fund and continue to participate in pension accumulation.

Important: 

  • You have the right to change your mind and refuse the offer within 10 working days from the date of the decision by submitting a request form for refusal to purchase a pension annuity. In this case, the pension benefit agreement concluded with the pension accumulation company would not enter into force - you would remain a participant in the pension accumulation until you re-apply for a pension annuity. It's important to note that a pension annuity waiver have to be submitted to "Sodra".
  • The application can be submitted through resident’s personal "Sodra" account or by arriving at any "Sodra's" customer reception.
  • "Sodra" must receive this request within 10 working days of the date of submission of the decision to you. Applications received after the expiry date are not executed and "Sodra" begins to pay pension annuity benefits.
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We recommend using the pension annuity calculator. In the calculator, you must enter the date of birth, the date on which you plan to apply (if you do not know exactly yet, we recommend that you keep the one already recorded) and the accumulated amount in the pension fund.

Calculator

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Accumulated payments are made to the selected bank account. There is no fee for this service.

Pension annuity benefits may also be transferred to an account with a foreign bank.

Important: Pension annuity payments can be credited to an account in a State belonging to the Euro Electronic Payments Area (SEPA), i.e. Member States of the European Union, Norway, Iceland, Liechtenstein, Switzerland, San Marino, Monaco, Andorra, United Kingdom.

You don't have to pay for this service. This provision applies not only to the transfer of pension annuity benefits to an account in a State belonging to SEPA, but also to other states such as Canada, Israel, etc.

Pension annuity is paid monthly from 17 to 26 days for the current month. The first payment will include underpayment for the period from the date of receipt of your application for a pension payment agreement in the pension accumulation company until the first day of the current month.

 

If you declare your departure from the Republic of Lithuania:

  • At the end of each year, you must provide Sodra with a document confirming that you live in a foreign country or that you are alive and in a particular area. The document must be issued (certified copy of the document) not earlier than 1st October of the current year.
  • Failure to submit this document by the 31st of December each year, will suspend the payment of the pension annuity from the 1st of January of the following year.
  • If this document is submitted at a later date, the payment of the pension annuity will be resumed from the date of suspension of payment.
  • If you are receiving an old-age pension, then it is sufficient to submit once to "Sodra" a document certifying that you live in a foreign state or that you are alive and in a particular area.
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The purpose of the activities of the Pension annuity payer (Sodra) is to ensure the payment of pension annuities to their recipients for life, in order to achieve the maximum benefit for them, and to manage the funds of the Pension annuity fund in a transparent and sustainable manner.

In order to enable Sodra to meet its obligations to pay pension annuities of a guaranteed amount in time, the contributions received for the purchased pension annuities are managed by a separate Pension annuities fund. Money in this fund are invested in such a way as to generate a return on investment at least not smaller than it is calculated in the size of the pension annuity.

The conclusions and recommendations of the Pension annuity fund council are followed while managing of the Pension annuity fund.

 

Pension annuity fund council 

Pension annuity fund council, acting collegially, supervises, how Sodra implements the objectives of pension annuity payment activities and manages the Pension annuity fund.

Pension annuity fund council consists of five members. Only people of impeccable reputation and meeting the qualification requirements approved by the Government, can be appointed, and become members of Pension annuity fund council. The qualifications, experience, and knowledge of the members of the Pension annuity council are assessed individually and collectively and must cover the following areas: actuarial, investment management, risk management, financial and product management.

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Main principles of investing

Money in pension annuity fund are invested according investment policy and strategy approved by Sodra. The funds of the Pension annuity fund may be invested only in the objects specified in the law on Additional voluntary pension accumulation, when it is possible to identify, assess, monitor and manage the risks arising from the investments (market (interest rates, stocks, currencies), liquidity, credit, concentration, reinvestment, inflation, etc.). 

The pension annuity funds must be invested in such a way as to ensure the security, credit quality, liquidity, and profitability of the entire investment portfolio. The assets of the pension annuity fund are held in such a way as to ensure its availability.

Assets of pension annuity fund cannot be lent or pledged unless it is lent or pledged for liquidity management purposes for up to three months, it cannot be guaranteed, warranted or otherwise secure the execution of other persons’ obligations.

The assets of the Pension annuity fund covering technical provisions must be consistent with the nature and duration of the liabilities arising from pension annuity and the investments are best suited to the interests of participants.

Derivatives can be used to manage the Pension annuity fund to reduce investment risk and ensure efficient management of the investment portfolio.

Pension annuity fund managers must ensure that investments and assets of the Pension annuity fund that are not traded on regulated financial markets do not exceed a prudent level.

The assets of a pension annuity fund must be diversified in order to avoid over-reliance on any type of asset, issuer or group of undertakings, counterparty or geographical area and excessive risk to the entire investment portfolio. The diversification of the assets of the pension annuity fund is ensured by considering the size and risks of the investment facility portfolio.

 

The principles of risk management 

The payer of pension annuity must establish a system for managing the risks arising from the activities of the pension annuity payer.

Risks must be managed in accordance with the risk management strategy, policy and processes described in internal documents to continuously identify, assess, monitor and manage emerging or potential longevity, investment and operational risks (both at individual and aggregate level) and report it to the Committee.
 

Risk management system at least has to include this risk:

  • Investment (market, liquidity, credit, concentration, and other) risk.  
  • Longevity risk.
  • Operational risk.
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  • How to find out how much I have accumulated in the pillar II pension fund?

You can find out the amount accumulated in the pillar II pension fund from your pension company. After having logged in to your personal Sodra account for the resident you can check the information about the pension company in whose pension fund you are currently accumulating.

  • Can I apply in advance for the acquisition of pension annuity (for example, at the time of arranging documents on pension)?

No. A request for the acquisition of pension annuity can only be submitted upon reaching the retirement age or in such a case where early pension has already begun to be paid

  • I want to acquire a pension annuity. What should be the first steps in this regard?

First, you should apply for the acquisition of pension annuity. This can be done after logging in to the personal Sodra account for the resident, or upon arrival at Sodra customer service reception, or in your pension company. After having written a request for the acquisition of pension annuity, the applicant must apply to his pension company within 3 working days for the conclusion of a pension benefit agreement.

IMPORTANT: If the pension benefit agreement is not entered into within the specified time limit, your request for the acquisition of pension annuity will be automatically annulled.

  • What type of pension annuity should I choose? What is a difference between them?

Choosing the type of pension annuity is your personal decision and it only depends on your individual needs. Information about the main features of pension annuities and their differences can be found here.

You may also use the pension annuity calculator and compare on your own what monthly benefit you would receive if you chose one or another type of pension annuity.

  • I have received a decision regarding the payment of a pension annuity, but want to change its type. What should I do?

In order to change the type of pension annuity, you should refuse, within 10 working days from the date on which the decision regarding the payment of pension annuity has been submitted to you, to acquire a pension annuity. To refuse to acquire a pension annuity, login to the personal Sodra account for the resident and select from the list of requests (menu on the left side of the main window) the request ‘Regarding refusal to acquire a pension annuity‘ (GPN23). Complete the request and submit it electronically. Request regarding refusal to acquire a pension annuity can also be submitted upon arrival at any Sodra customer service reception. When you will receive a notification from Sodra that the decision regarding the payment of pension annuity has been cancelled (declared invalid), you will be able to re-apply for the acquisition of a pension annuity and enter into a new pension benefit agreement with your pension company.

IMPORTANT: After the expiry of the period of 10 working days from the date on which the decision has been submitted to you, you will no longer be able to change the type of pension annuity.

  • Will I be paid benefits only up to 80 years of age if I will acquire a standard pension annuity with a guaranteed payment period?

No. The payment of all types of pension annuities is lifelong, including a standard pension annuity with a guaranteed payment period. A standard pension annuity with a guaranteed payment period ensures that a pension annuity will be paid at least until the recipient of pension annuity reaches the age of 80 years. In the event that the person himself lived shorter than until this date, his inherritors would be paid one-off benefit for guaranteed pension annuity benefits that have not been paid to him. Otherwise, the pension annuity will be paid to its recipient all life.

  • I have received a decision regarding the payment of pension annuity. however, I do not receive a payment for the first month. Why?

If you have not received a pension annuity benefit for the first month, this could have happened because the deadline for your refusal to acquire a pension annuity has expired later than 9 days before the beginning of the period of payment of pension annuity benefits, which is specified in the decision. In this case, you will receive this benefit next month together with the pension annuity benefit for the current month.

If you have not received a pension annuity benefit for more than 2 months, call the telephone numbers 1883 / (+370) 5 250 0883, or come to the nearest Sodra customer service reception so that together with you we could find out the reasons

IMPORTANT: pension annuities are paid on the 17th-26th day of each calendar month.

  • Will I be paid a pension annuity together with a pension?

No. Pension annuities are paid on the 17th-26th day of each calendar month separately from pension.

  • I have chosen a deferred pension annuity. Why am I not receiving benefits from Sodra?

The word ‘deferred‘ means that the payment of pension annuity is deferred for a certain time. Deferral period specifically for a pension annuity paid by Sodra is until you will reach 85 years of age. Until then, you will receive periodic benefits from a pension company in whose pension fund you have been accumulating. Sodra will start paying you pension annuity benefits only from the month in which you will turn 85.

  • Will I receive the same amount of pension annuity benefits every month?

A pension annuity cannot decrease. Sodra ensures that the amount of a pension annuity, which is paid every month, is the same. Sodra invests the assets received for pension annuities so that it could earn extra income. Therefore, in the future, pension annuities can be increased from distributed profits. Sodra is a budgetary institution. Therefore, all earned profits must be distributed to recipients of pension annuities.

More information on how pension annuity assets are invested and what the investment results are can be found on the website of Sodra.

  • How is the profit, that Sodra earns from the activities of pension annuity payment, distributed?

In carrying out the activities of payment of pension annuities, Sodra may earn a profit from unused one-time deductions to cover administration costs (if the income from deduction exceeds administration and management costs of the activities of payment of pension annuities), mortality (if the recipients of pension annuities live shorter on average than is included in the amount of pension annuity), and investment. Sometimes profits can also be earned for other reasons. At the end of the calendar (reporting) year, the specialists of Sodra shall calculate, in accordance with the Description of the procedure for distribution of the profits of the pension annuity fund to the recipients of pension annuities, which was approved by order of the Director of the SSIF Board, profit of the reporting year, and shall assess the possibility of distributing it to recipients of pension annuities. Upon receipt of recommendation of the Board of the Pension Annuities Fund, the Director of the SSIF Board may decide not to distribute the profits earned, if its distribution would jeopardize the financial sustainability of the Pension Annuity Fund. If decision is made to distribute profits, the amount of pension annuity allocated to a specific recipient of pension annuity will be indexed for the part of the profit allocated to a specific recipient of pension annuity, unless, in exceptional cases, another way of distributing profits will be specified in the decision. Each recipient of pension annuities will personally receive a decision on profit distribution in general and the share of profits specifically allocated to the recipient of pension annuities to his personal account on the website of Sodra.

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Update date: 2022-03-31
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