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Second pension pillar has disappointed so far

The Finance Ministry’s Financial Policy Institute (IFP) has commented on the first old-age pension paid out form the so-called second pillar. Beginning January 2015, all people who have reached or who are going to reach 62 years before the beginning of 2015 and saved money in the so-called second pillar can begin drawing money from their private pension savings for the first time. Three insurers who obtained licenses are paying out the pensions.

The Finance Ministry’s Financial Policy Institute (IFP) has commented on the first old-age pension paid out form the so-called second pillar. Beginning January 2015, all people who have reached or who are going to reach 62 years before the beginning of 2015 and saved money in the so-called second pillar can begin drawing money from their private pension savings for the first time. Three insurers who obtained licenses are paying out the pensions.

There are three forms of payments from the second pillar: lifelong pensions paid out by insurance companies; so-called programme withdrawal (the scheme for payment of saved funds by a pension fund management company) and a temporary pension to be paid out by insurance companies, according to the annuity revision adopted last year.

The sum of first pensions from the second pillar has surprised even the biggest sceptics. The Union insurer will pay out the lowest pension, amounting to €8 monthly, the Sme daily wrote. Life insurance companies that were given the possibility to pay out life annuity insist that they have not made a mistake. Saving time was too short, they claimed to Sme, and the first applicants did not earn much.

The situation became even worse after Prime Minister Robert Fico pushed through the reduction of the rate of payments for the second pillar, they say. One aspect of the problem was that the law does not enable savers to choose the way in which their pensions will be paid. Some savers even cannot pick among individual insurers, the daily wrote.

Each of insurers has set a different limit of the saved sum necessary for receiving life annuity. Those who saved less than €3,500 will get an offer only from Union, but not from Generali or Allianz. Union pays out pension when the savings amount to mere €2,100; Generali at €3,500 and Allianz at 4,700.

So far, 91 people have asked for a pension from the second pillar to date. Others still can wait for a better bid, the SITA newswire wrote, adding that their number is growing every day and totally, 3,000 people are expected to ask to draw their pensions.

Vice-chair of the opposition Most-Híd party, Ivan Švejna, asked Labour Minister Ján Richter to file at the January session of parliament the draft amendment of the law on old-age pensions that would change the rules for paying out form the second pillar. Švejna pointed to the IFP statement that the pensions paid so far are one-fourth lower that fair.

“Thus, the ministry would publicly admit that the way of paying pensions as presented by the Labour Ministry has this consequence,” Švejna said, as quoted by SITA. He deems the whole amendment to the law on old-age pensions related to the second pillar bad. Švejna opined that there is no competition of the way of paying the savings from this pillar. This state of matters is advantageous for insurers, but not for savers who would be better off if they could choose the way in which they withdraw the savings.

IFP estimated, as cited by SITA, the average amount of the pension paid out to be €30 – while all pensioners, including those who have saved just small amounts so far, are counted in this figure.

(Source: Sme, SITA)
Compiled by Zuzana Vilikovská from press reports
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