Pension costs of 1. pillar have been constantly increasing and we can already see, that its expenses are bigger than its income. We have been getting older as the population and therefore the pillar scheme has been becoming dysfunctional and thus it is needed to secure income from the other sources. This is the reason why we have 3 pillar system in Slovakia. How this system works and basic information can be found here.
One of the main means of income for the future pensioners should be the income from 2. pillar. The contributions should have been 5,5% of brutto income and gradually they should have been increasing up to 6%. However, according to the latest change, the contribution to 2. pillar has decreased at 4% of the brutto income . This may seem as a cosmetic change, but in reality, the saved will have lost thousands of euros.
Second Pillar allows citizens to:
- create their own reserves, not only in the Social Insurance Agency (SIA)
- save up obligatory contributions – these contributions are not
- savings be part of the heritage – in case of the premature death of the saver could help the family significantly
- choose the funds – we recommend the index funds as they are one of the most lucrative
- gain so called interest on interest
- gain the savings right after retirement starts
2. pillar still provides many cons for the savers despite the latest changes. Decrease of the future contributions only creates a bigger demand for the need of one’s own retirement savings up to minimal of 2% of brutto income.
Let’s see an example:
The average Slovak income in 3O of 20231 was 1403€. In this case, the contribution to II. pillar has decreased by 1,5% today, making 21 € per month. From a long-term perspective, it is 2%, making 28€ per month.
| average brutto income | contribution decrease by 1,5% |
| Contribution decrease by 1,5% | 21 € monthly |
| contribution decrease by 2% | 28 € monthly |
| Pension management company | Uniqa |
| fund | index |
| average fond productivity | 7,5% p.a. |
| saving length | 30 years |
| Amount of savings after 30 years, in case of 6% contributions to the II. pillar (before the changes) | 114 137 € |
| Amount of savings after 30 years, in case of 4% contributions to the II. pillar (after the changes) | 76 091 € |
| The saving account difference | 38 046 € |
After the contribution decrease, the saver will have on their savings account after 30 years with 7,5% p.a, by 38 046€ less!2 What if I would decide to save up 2% on top, so I would compensate for the II. pillar changes? As well as, I would save extra 3% from my brutto income, so I could enjoy my retirement? Let’s see:
| Compensation for the contribution decrease to the II. pillar- 2% of my brutto income | 28 € monthly |
| Saving for a better future- 3% of my brutto income | 42€ monthly |
| Investment amount | 70€ monthly |
| Portfolio | Index stocks |
| The average fund productivity | 7,5 % p.a. |
| Saving length | 30 years |
| The saving account amount after 30 years | 94 910 € |
In our example, the saver would have saved up around 171 000€ thanks to their own financial long-term reserve. We help our clients to create and manage their financial reserves and thus offering the savers to look forward to their retirement.. Ako začať sporiť aj s malým rozpočtom napríklad aj na spomínaný dôchodok si viete prečítať here.
Have you entered the II. pillar? If so, the changes will affect you. If not, we recommend to enter and set up the portfolio just right.
We will help you to secure your retirement. Do not hesitate to contact us and we will help you for free.
Your ProFin Experts team! Translated by Barbora Zemko Zuzaniaková
- source: https://rb.gy/e5v9v8 ↩︎
- source: https://index.sme.sk/kalkulacky/sporenie ↩︎
