BRATISLAVA, October 7, (WEBNOVINY) — A total of 4,000 young savers enrolled in the second pension pillar in the first half of this year. A report of the National Bank of Slovakia (NBS) on the situation and development on the financial market in the first six months of this year further informs that the number of new savers that entered the second [capitalization] pension pillar doubled compared with the same period of last year. As of the end of June, altogether 1.44 million savers were saving for a pension in licensed pension fund management companies in Slovakia. The central bank also reported that changes in the number of savers in the second pension pillar have minimized since the cancellation of the compulsory entry of young people in the capitalization pension pillar in January 2008.
The better part of new savers started saving in growth funds in the first half of the year, “although more savers have been leaving these funds which meant that the overall balance in the growth funds was negative,” reported the central bank. Savers who left growth funds mostly opted for balanced funds as alternative. “As for categorization of all savers among three types of funds expressed as percentage, gradual outflow of savers from growth funds to conservative and balanced funds continued, NBS concluded.
Automatic entry of young people in the second pension pillar will be implemented as of the beginning of April of next year. Young people who will become payers of pension insurance for the first time and therefore automatically enter the second pillar will have 180 days to conclude a contract with one of the pension fund management companies as of next year. At stake are people who become employees for the first time, self-employed persons with a duty to pay pension insurance, or state’s policyholders during their parental leave, or during their eligibility to a contribution for nursing. If they fail to choose a pension company in this period, the social security provider Socialna Poistovna will select one for them. Socialna Poistovna is charged to assign undecided young savers to pension fund management companies alternatively according to the alphabetical order of these companies. A young saver who will be assigned his/her pension fund by Socialna Poistovna is to save for a pension in the mixed pension fund, as will be enacted in the amendment to the old-age pension saving law. Young people who automatically enter the second pillar of pension saving will have two years after the automatic entry in the second pension pillar to decide on exiting the capitalization pension pillar.
Minister of Labor and Social Affairs Jozef Mihal is also considering the possibility to include reopening of the second pension pillar into next year’s draft revision to the law on old-age pension saving. “We will consider this possibility in the planned revision to the law which will stipulate rules for payout of pensions from the second pension pillar,” said the Labor Minister. The minister opines that the discussion on reopening of the capitalization pillar will only be fair if people have sufficient information on how the pensions from the second pension saving pillar will be paid out and are aware of what they can expect from the state-run pay-as-you-go pension system. “What matters now is how the coalition will deal with the question of when and whether at all the second pension pillar should be opened,” he concluded.
Another issue the minister says needs to be addressed is whether the capitalization pillar should be opened only for young people who have not voluntarily entered the private pension system in the past or for all people. Mihal says that there are only a little over 100,000 of such so-called delayed savers since only about 10 percent of young people avail of the opportunity to enter the second pension pillar. The Labor Minister said that a general agreement was not found regarding reopening of the second pension pillar during discussions on approval of this year’s revision to the law on old-age pension saving. “Discussions on potential reopening of the second pension pillar will be legitimate only after the whole system is legislatively enacted,” reasoned the minister. This is not the case at the moment owing to missing rules for payment of pensions from the second pension pillar.
The former government of Robert Fico opened the second pension pillar twice, in 2008 when over 106,000 savers left the private pension saving and almost 23,000 people enrolled and between November 15, 2008 and June 30, 2009 when 66,000 savers exited and 14,500 new savers entered the capitalization pillar.
SITA