22. December 2020
We would like to inform you that the acceptance of applications for opening a III pillar pension account for children in 2020 has now ended at LHV. We are handling applications that have reached us from existing LHV clients on a priority basis. New applications will see the opening of the child’s III pillar take place in 2021.
We are delighted that so many clients have chosen LHV Pank as the place to open their III pillar and that the applications have been submitted early. The great interest in the III pillar is due to the pension reform that will enter into force at the beginning of 2021. All those who conclude a III pillar contract and make their first contribution no later than 29 December 2020 can start withdrawing money from the pillar starting from the age of 55 on preferential terms, i.e. by paying 10% income tax instead of 20%. However, if the first contribution to the III pillar is made after 29 December 2020, the money cannot be withdrawn from the III pillar on favourable terms until 5 years before reaching retirement age. The new pension reform will see the age limit for the application of tax incentive on pension fund payouts be raised from January 2021.
In light of this, we remind you that there is a very long period of time left until today’s children reach retirement age and that various pension reforms and changes are possible in the future. LHV is of the opinion that the opening of a III pillar account is reasonable primarily if the child is soon to reach adulthood or if the child is already working and is planning to start collecting for retirement and will be able, as an adult, to use the income tax benefit on the contributions made to the III pillar. We certainly encourage clients to think about their children’s future, to save and invest money for them. As a market leader, LHV provides the best opportunities to make investments. By opening a Growth Account, investing is easy and the opportunity for micro-investments is also possible. LHV also offers favourable conditions for purchasing securities – holding and acquiring Baltic shares is free of charge. In the New Year, the opportunity to hold foreign shares in an LHV securities account will also become free of charge, if the value of the securities does not exceed EUR 50,000. Additionally, service fees related to foreign securities will also decrease.
We remind you that, similarly to adult clients, the contributions made to the III pillar for children must be made no later than 29 December 2020, so that joining the third pillar would be completed this year. The first payment to the child’s III pillar can only be made by the parent after we have informed the parent that the child’s III pillar account has been opened. The corresponding payment order must be executed exactly as indicated in the instructions. A payment containing incorrect data or even a typing error (e.g. unnecessary space or omission of the notation “IK”) will be refunded and the third pillar account will not be activated, as the pension fund unit purchase will not take place in that case. We recommend that clients who have made a payment to their own or to their child’s III pillar check whether the pension fund units have been credited to the III pillar account. This usually happens within 2 days. If no pension fund units have been received, please check your account to see if the payment has been made correctly and has not been refunded.
See also the information on the opening of the III pillar for adults on the LHV website.
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