CZECH REPUBLIC - The Czech government is planning to restructure its pension fund system by introducing third pillar personal pension arrangements which are described as being more transparent vehicles but which do not carry a full guarantee.
 
The government will draw up a bill on the new pension system in the course of the next year and has now approved key principles for the redesign of the pensions system which are expected to come into effect from 2010 or 2011.
 
The new pension arrangements are thought to be personal pensions as they will be "similar to investment companies managing their own mutual funds," according to Petr Benes, chief executive of CSOB, the Czech Republic's largest pension fund.
 
"New clients will join just the new funds and it will be possible to switch from the old pension funds to the new ones," said Benes.
 
The new pension companies will exist alongside the current occupational pension funds and are expected to be "more transparent" in relation to costs.
 
Personal pension providers will be required to offer at least three porfolios - conservative, balanced and dynamic - but there will be no explicit guarantee for positive returns every year as is seen in the current pension plans and the risk will therefore be borne solely by the individual.
 
Benes noted his pension fund has seen a decrease in returns over recent months because of the financial crisis but claimed it "will stay comfortably in black numbers".
 
"Our portfolio is very conservative, having very low exposure towards equity markets  - only 3% - and the rest is in government bonds, treasury bills, term deposits and cash," said Benes.
 
He added CSOB has "no exposure to corporate and banking bonds" so believes "we think we are in a safe zone".

The third-quarter performance data for all 10 Czech pension funds will only be available in mid-November, according to the Czech pension fund association APF.

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