More and more people in Slovakia are worried about the future of pensions. At the same time, confidence in the state’s ability to provide sufficient income for old people is decreasing. According to a survey1 by Finax, up to 77% of Slovaks fear that their state pension will not be enough to maintain their standard of living.
At the same time, approximately two-thirds of the respondents do not expect the state to take care of them. On the contrary, up to 69% of the population are even afraid that the government will reach out to their savings in the second pillar. At the same time, the European legislation brings a pension solution that is independent from the interventions of local governments and manages assets in the amount of more than 100 million. euros to thousands of Europeans. Despite this, more Poles than Slovaks use the European scheme.
The survey by Finax shows that mistrust of the state does not only concern the amount of future pensions, but also the stability of the pension system itself. Up to two-thirds of Slovaks are afraid of the government’s negative interventions in the savings they have in the second pillar. Since its inception, it has repeatedly been the subject of political interventions and discussions. The last time this happened was due to government consolidation.
“Two years ago, as part of consolidation, the government reduced the contribution of savers from 5.5% to 4%, thereby transferring approximately 365 million euros to the state coffers at the expense of citizens’ future pensions. This is also why it is important that people build their own retirement savings, either through individual investment or through a solution brought by the EU – the so-called European pension. Thanks to European legislation, it is protected from local government intervention,” he says. Ján Tonka, expert in personal finance and pensions at Finax.
Last year, as part of consolidation measures, a further reduction in contributions from 4% to 2% was discussed, which would bring the state approximately 600 million euros per year. In the end, this step did not happen. However, the second pillar is the subject of long-term discussions, and according to Tonka, its further adjustments in the future cannot be ruled out.
Slovaks abroad and pension portability
According to estimates, he lives or approximately half a million Slovaks work within the EU countries. Compared to OECD countries, Slovakia has the second highest share of university students studying abroad, namely 19%. Higher salaries are among the main reasons Slovaks go abroad. Among the barriers that discourage them from returning are mainly corruption, radicalization of society, low living standards and poorer quality of the education system.
“For hundreds of thousands of Slovaks living abroad, a pension solution tied exclusively to one country ceases to make sense. Young people study or work in different countries and often move in search of better opportunities during their lives. It is an advantage for them if their savings “travel” with them and in a unified European framework they are not dependent on local pension systems and their political changes,” adds Ján Tonka from Finax.
By saving in the EU scheme, the saver can keep his pension even after moving to another EU country and does not have to start with a new pension product every time he changes residence. Savings thus remain in one solution and a person can continue them even after moving abroad for work, studies or family.
The Poles are leading in the European solution
Currently, according to Finax data, thousands of Europeans are saving in the European pension, while the value of their assets has already exceeded 100 million euros. Not only the total volume is growing
managed funds, but also the value of individual savers’ savings. The average amount in the pension account currently amounts to 6,193 euros.
This European pension scheme is used the most in Poland, where almost 10,000 people are already saving. Differences between individual countries are also significant in the amount of regular contributions. While a Slovak saver saves an average of 150 euros per month for the European pension, a Polish saver invests an average of up to 250 euros per month.
Poles thus use the benefits of this scheme to a significantly greater extent. The main reason is the tax advantage, since in Poland the European pension is completely exempt from income tax. Without this benefit, savers would have to pay a tax of 19% on the profit. It is currently possible to open a European pension not only in Poland and Slovakia, but also in the Czech Republic, Croatia and Ireland.
Experience with repeated interventions in the second pillar in Slovakia shows that relying exclusively on the domestic pension system may not be sufficient for savers. According to Tonka, it is therefore not only a matter of the amount of future pensions, but also of trust, stability and greater control over one’s own savings. The European pension represents one of the options for building up savings outside of local pension systems, within the European legislative framework and with the option of continuing to save even when moving abroad.
