BRATISLAVA, June 8, (WEBNOVINY) — The Cabinet on Wednesday passed a concept of second pension pillar changes tailored by the Labor Ministry. As of April 1, guarantees will cease to exist in the current growth and balanced fund in compliance with the new rules, but not in the conservative fund. Savers will have time to quit the mixed (the current balanced fund) or equity fund (growth fund) and switch to the guaranteed bond fund (presently the conservative fund) until April 1, 2012. A new equity-linked index fund will be founded. The ministry wants to enable diversification of pension savings into two funds, provided that one of them will be the guaranteed conservative fund.
Prime Minister Iveta Radicova initially pushed for preservation of guarantees in all three pension funds but the Cabinet-approved scheme will make the capitalization pillar definitely more advantageous than it is now. She underscored higher returns and improved guarantee system. Radicova hailed the fact that savers will have enough time to quit the balanced or growth funds and switch to the conservative fund.
The existing conservative fund will be called the bond fund and, as the labor minister says, the new name will better reflect the investment strategy within this fund. The change in fund valuation should enable purchase of securities of longer maturity with higher potential returns. The balanced fund will be renamed the mixed fund and the growth fund will be labeled the equity fund. The brand new equity-linked index fund is to focus on stock markets and follow the performance of a selected stock index or a basket of stocks. There will be no guarantees in this fund, either.
Pension fund managers will be obliged to notify their clients placing money into other than the conservative fund in writing of the end of guarantees by January 15, 2012 at the latest. Young people will enter the capitalization pillar automatically when they start working. As of April 2012, they will have 180 days to ink a contract with one of the licensed pension fund managers. If they fail to pick a company, the social insurance agency Socialna Poistovna will do so instead of them. After having entered the second pension pillar, young savers will have 730 days to quit it.
Fees for fund management in the existing funds will be preserved at 0.3 percent of the average annual net asset value. The bond fund will no longer collect fees for returns. The management fee in the equity-linked index fund will reach 0.2 percent of the average annual net asset value.
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