Slovakia pension reforms may bring opt-outs
SLOVAKIA - Changes to the first and second pillar of the Slovak pension system might soon allow people to opt-out of contributing to occupational pension schemes.
While in January prime minister Robert Fico withdrew his calls for making the second-pillar voluntary, his social democratic SMER party has now voiced support for introducing an opt-out option, according to the Slovak financial newspaper Hospodarske noviny.
Fico's suggestions had sparked harsh criticism from pension providers, mostly foreign-backed insurers, as well as savers themselves who argued a voluntary approach would shrink the current SKK28.46bn (€845m) second pillar and mean people have no longer control over their own retirement savings.
It was also suggested by market participants the government wanted to use the second pillar funds to plug a deficit in the PAYG state retirement scheme.
The Slovak ministry of social affairs is currently writing a report on changes to the country's pension provision, which is scheduled to be discussed by the government coalition in two weeks' time.
What the report will most likely not contain is a change to the level of contribution to the first and second pillar. Employees currently pay 18% of their wages towards retirement provision, split equally between the state PAYG scheme and the occupational pension funds.
Against the wishes of his financial adviser, Peter Stanek, the prime minister, said there will be no increase in retirement age. However, a work ban for pensioners receiving more than the average state pension might be introduced.
Pensions for former policemen and soldiers are also said to be under review as - according to the government - they retire earlier, are earning more than the average in their careers.
In order to make the pension system more affordable, ministers are also contemplating lowering annual pension increases to less than the inflation rate.
"I am not saying that these issues will be discussed in the report, which is under way, but all proposals should take into consideration our admission to the Eurozone and should not jeopardise it," Stanek was quoted as saying by Hospodarske noviny.
According to the paper, a few hundred billion Slovenska koruna (SKK) are needed to remove the deficit in the state pension provision.