Mass Withdrawals of Pension Funds, but Experts Warn: The Most Important Decision Lies in the Future

Since January 1, thousands of Lithuanian residents have, for the first time, gained real freedom to decide for themselves what to do with their second pension pillar funds. The first days showed extremely high public activity—so high that the systems of Sodra and pension accumulation companies experienced disruptions. Although for many the key question so far seemed to be whether to withdraw their accumulated funds, experts point out that the decisive moment still lies ahead.

Until the beginning of this year, 1.42 million people in Lithuania were participating in the second pension pillar, but this number may significantly decrease in the near future. It is forecast that during 2026 about 20–40% of participants will withdraw from pension accumulation, and approximately €1.2 billion could additionally flow into the economy.

Miglė Grybinienė, Head of Marketing at the crowdfunding platform Profitus, says that changes of this scale are not a problem in themselves—the biggest question is what happens when the funds actually reach people.

“The biggest challenge usually arises not on the day the decision is made, but later, when the funds actually reach a person’s account. At that point, the individual faces a practical question for the first time: do they have a clear plan for what they will do with that money? If there is no such plan, two things usually happen—the funds dissolve into everyday expenses or remain idle in the account. In both cases, the outcome is the same: time is lost, the opportunity to earn returns is lost, and inflation steadily ‘eats away’ the value of the money,” says Grybinienė.

According to her, such decisions are often driven not only by financial literacy but also by psychological factors. Behavioral economics shows that people tend to value what is happening now more strongly than what awaits them in 10, 20, or 30 years.

“When a person receives a larger sum at once—whether it is pension savings, an inheritance, or a bonus—decisions are often influenced by so-called present bias: short-term benefit seems more important than long-term goals.

That is why pension reforms that allow people to withdraw accumulated funds often become a test—not of the decision itself, but of what happens afterward, when the money is at the person’s disposal. We have already seen such examples in other countries—for instance, Estonia is a good indicator of what happens when withdrawal is not accompanied by a plan. A significant portion of the money remained idle in accounts, another part was used to repay debts, but long-term debt reduction did not occur because debts eventually returned. The remaining portion was consumed,” says Grybinienė, adding that Estonia’s experience is a very clear lesson for Lithuania: once the money is withdrawn, the most important thing is to have direction and make a decision that creates long-term value.

Two Different Questions Being Decided

However, M. Grybinienė notes that in the current public discussion, the most visible question is what to do with withdrawn funds and how to avoid spontaneous consumption, but the reform offers broader choices.

“I notice that most public attention is focused on withdrawing funds, but it is often forgotten that people in this situation are actually deciding two different questions. The first is whether to withdraw the accumulated funds, and the second is whether they want to continue contributing to the second pillar under the same principle or seek more flexibility and control—for example, to stop contributions and make decisions about payments and investments independently, according to their financial situation.

However, one aspect is important here: if a person does not yet know what exactly they will do with the withdrawn funds, this usually means the decision has not been fully thought through. In that case, it is more rational to leave the money in the system until a clear plan emerges. And if a person consciously chooses to stop contributing for the sake of flexibility, it is important that periodic investing shifts to another solution—otherwise, the funds remain passive and gradually lose value. Various models may be suitable for this—from classic investment instruments to crowdfunding, which allows gradual investing, risk diversification, and consistency. For example, through the crowdfunding platform Profitus, one can start investing in real estate projects from €100—this shows that investing can be flexible, accessible, and adaptable to an individual’s situation,” says Grybinienė.

According to her, in this situation the most important factor is not a one-time decision, but whether a person can develop a long-term habit—regularly putting money to work instead of leaving it to impulsive decisions.

“Long-term financial results are usually determined by discipline and consistency. Funds invested periodically over time create an effect that cannot be achieved by keeping money in an account or using it for consumption. Therefore, the first step is not to choose an instrument, but to clearly define the goal and time horizon—whether it is an emergency reserve, a housing down payment, children’s future, or additional income in old age,” says Grybinienė.