BRATISLAVA, January 12, (WEBNOVINY) — Young people, who themselves will not choose the administrator of their pension savings after introduction of automatic entry into the second pension pillar, will probably be equally distributed among all pension fund management companies. “We may restore the previous model when five pension fund management companies rotated,“ said Minister of Labor and Social Affairs Jozef Mihal after the Cabinet session on Wednesday. He opines that this system was fair since pension fund management companies divided their future clients among themselves based on an automatic principle. “First of all, young people will have a chance to make their own decision into which pension fund management company they want to enter,“ said the minister.
The entry in the second pension pillar was obligatory for young people entering the job market until the end of 2007. If young savers did not seal a contract with one of pension fund management companies within 30 days since taking up their first employment, the social security provider Socialna Poistovna chose an administrator of their pension savings on their behalf. Socialna Poistovna assigned 40 percent of savers to pension fund management companies. The social security provider chose pension fund management companies that charged the lowest fees for administration of pension savings in a conservative fund to mandatory savers. If more companies charged the lowest fee for administration of savings in this fund, the insurer assigned savers to these pension fund management companies equally in alphabetical order, in line with the then effective law on old-age pension saving. In the second half of 2007, five pension fund management companies charged the same fee for savings administration in the conservative fund while the sixth company charged a higher fee compared with other five.
Leaders of coalition parties agreed on Tuesday that the second pension pillar would be compulsory for young people who enter the labor market for the first time. “We agreed that we would restore the original state of the second pension pillar,“ stated Prime Minister Iveta Radicova after the session of the Coalition Council. All graduates will thus be obliged to enter the second [capitalization] pension pillar when they are employed for the first time. Radicova elaborated that if they reconsider advantageousness of saving in the second pension pillar, they can leave the system within three years since the entry. Chairman of the Association of Pension Fund Management Companies perceives this measure positively. He does not object to the possibility of leaving the system within three years since entering either. “It is all right, we do not want to force anybody to stay in the system,“ he said.
SITA