Slovakia is to re-open its second pillar, for the fourth time since 2008, to allow dissatisfied members to leave.
The exit window, and terms and conditions for members leaving the system, have not been finalised yet and will follow discussions between Ján Richter, minister for Labour, Social Affairs and Family, the six second-pillar management companies and the National Bank of Slovakia (NBS).
The second pillar has some 1.5m members and assets, as of the end of September 2014, of €6.3bn, according to the NBS.
Prime minister Robert Fico reiterated his long-standing hostility to the system by stating that it was disadvantageous for two-thirds of the membership.
However, Richter has stressed that the government does not intend to dismantle the second pillar.
The announcement coincided with the start of second-pillar payouts this year for the 30,000-odd members who have reached age 62.
Under legislation approved last year, pensions can be paid out in three forms: lifetime annuity from an insurer, temporary pension from an insurer, or a programmed withdrawal from a pension management company.
To date, three insurers have been licensed: Allianz-Slovenská Poisťovňa, Generali and Union.
The system operates through a competitive bidding process mediated by Sociálna poisťovňa, the first-pillar agency.
Only a handful of eligible retirees have applied so far, but the offers have been low and are likely to have provided the impetus for the latest re-opening.
According to estimates from the Finance Ministry’s Institute for Financial Policy (IFP), the monthly payout in 2015 will average only €30, with 60% of this year’s eligible retirees receiving less.
The institute does acknowledge nevertheless that the system is only 10 years old, and that payouts will increase as savings build up, and at a faster rate than the state pension.
The IFP also noted the low returns generated by the funds since 2009 – 2% per year compared with 16% for the MSCI World Index.
However, it attributed this partly to the instability caused by government policies, including the slashing of the contribution rate from 9% to 4% in 2012, and 2013’s mass movement into so-called ‘guaranteed’ funds.
That year, members had to choose one of the four funds from their provider with varying risk profiles or default automatically to the guaranteed one.
As of end September 2014, the guaranteed funds, despite their much lower returns, accounted for 89% of all assets.