Czech third-pillar funds registered a further fall in membership as the new system enters its second year.

According to figures from the Association of Pension Funds of the Czech Republic (APF CR), as of the end of March 2014, the number of participants totalled 4.92m, a fall of 0.8% since the start of the year.

The number of members of the so-called “transformed” funds, which were closed to new entrants in November 2012, declined by nearly 70,000 as retirees cashed in their benefits.

The replacement “participation” funds increased their membership by nearly 29,000 to 1.2m.

So far, the participation funds, which require a higher contribution to qualify for an additional state contribution, have not proved as popular as the transformed ones.

In addition, unlike the one-size-fits-all transformed funds, the participation funds, with their range of risk profiles, do not offer a guaranteed return.

Assets under management in the transformed funds grew by 2.9% year to date in Czech koruna terms to CZK289bn (€10.5bn), and those in the participation funds by 43.7% to CZK1.8bn.

The transformed fund investment strategies remained extremely conservative, with Czech government bonds accounting for nearly 70% of aggregate portfolios, a further 22% in other bonds and money market instruments, and only 1.5% in shares and participation certificates.

Membership of the second-pillar funds also grew, 0.8% to 82,630, which is surprising given that the current government intends to abolish it by 2016, while assets increased by 88.9% to CZK654m.

Despite their wider investment horizons, around a half of second pillar and participation fund assets were placed in bank deposits and similar accounts.

A pension reform commission appointed by the government to produce a plan for dismantling the system while safeguarding individual members’ accumulated assets started work in mid May.