Rules for second pillar payments set

PARLIAMENT passed at its June 5 session rules for the payment of pensions for the first 3,000 seniors who will start drawing them from the second, private pensions pillar next year. The amendment to the pension law was supported by 101 MPs, while seven were against and 20 abstained from the vote, the SITA newswire reported.

PARLIAMENT passed at its June 5 session rules for the payment of pensions for the first 3,000 seniors who will start drawing them from the second, private pensions pillar next year. The amendment to the pension law was supported by 101 MPs, while seven were against and 20 abstained from the vote, the SITA newswire reported.

Under the new rules, most of the pensioners will have to ask for life-long payment by the private insurers, with only the wealthier pensioners being able to draw their money immediately through so-called programme withdrawal. The reason for this system is that, according to the politicians, the pension from the second pillar combined with the money from the first, pay-as-you-go pillar, will not be high enough. Currently the cap is set at €550. The state-run social insurer Sociálna Poisťovňa pays about €390 on average, the Sme daily wrote.

The condition for pensioners willing to receive their money through programme withdrawal will be that their gross salary when employed has to be 1.25 times the average wage, i.e. about €1,030. At the beginning, only 12 percent of pensioners will be able to withdraw their money immediately, while later it will rise to 20 percent, Sme wrote.

Despite the plan for most pensioners to receive money from the private life insurers, it is not clear how many of them will join this scheme. The insurers will have to ask the National Bank of Slovakia (NBS), the country’s central bank, for a licence to offer pension payments as of July. According to the plan, the private insurers will have to prepare an offer for paying the pensions from the second pillar and send them to the central electronic system. The pensioner will subsequently choose the best offer and sign an agreement. The law does not stipulate how the insurers will count the pensions.

As some of the clients will not have enough money to receive a life-ling pension from a private insurer, they will have a chance to agree with the pension funds management company that they will either receive a one-off payment or payment in instalments, Sme wrote.

Moreover, pensioners will decide whether or not they want their pension valorised.

As for inheriting money, pensioners will be able to buy temporary inheritance that will last seven years. This means that if a pensioner starts receiving his pension and dies three years later, his or her heirs will get an amount equalling to four-year payments. This option will mean that the pension will be 2 percent lower than if pensioners did not want their heirs to inherit the remaining money, Sme wrote.

Additionally, pensioners will be able to decide whether they want their bereaved to receive a widow’s or orphan’s pension that will be paid out over one or two years. If they choose to do so, the pension will be 10 percent less, Sme wrote.

It is expected that the first pensions will not be high, as the clients of pension fund management companies only have about €5,000 on their accounts. This means that they will not get more than €30 a month to their pension from the first pillar, Sme wrote.

Source: SITA, Sme

Compiled by Radka Minarechová from press reports

The Slovak Spectator cannot vouch for the accuracy of the information presented in its Flash News postings.

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