High-standard Retirement

Decide for yourself about your pension

The latest pension analyses show that if we want to maintain the standard of living also after retirement, we can no longer rely on the state. We solely will be responsible for the amount of our pension.

The graph shows that the share of an average pension will sharply decrease in the future compared to the average wage in Slovakia.

While current pensioners have to live on half of their former income, the future ones will only receive one third.

The share of average retirement at the average wage will fall sharply in the future

Why?

The Slovak pension system is based on three pillars. The pension insurance system is based on the Social Insurance Agency, which pays the so-called state pension (Pillar 1), which works on ongoing funding. This means that the money paid by those who work as pension contributions is immediately paid out as pensions to the current pensioners. Money does not increase in value; it is merely transferred from those who work to pensioners.

This system is unsatisfactory because the money collected is no longer sufficient for the payment of pensions. The Social Insurance Agency must cover the deficit from the state budget. And the situation will get even worse in the future.

Demography is the Reason

For the last 20 years, the birth rate as well as the number of those who work has been decreasing. But, the number of pensioners has been rising. At present, 1.6 of those who work contribute to the Social Insurance Agency for one pensioner. The ratio will be balanced out in 2040. In 2060, only 0.74 of those who work will contribute for one pensioner.

The lack of funds in the Social Insurance Agency will mean that pensions will have to be lower and the retirement age will have to increase. The retirement age is already being gradually increased. We are no longer entitled to retirement at 62 as was the case a few years ago, but 63 days are added each year to the age of 62. So, those who are now in their 30s are to retire at the age of nearly 67.5 years.

Besides the state pension, there is also Pillar II (DSS) and Pillar III (DDS). These two pillars can help ensure that your total pension is higher.

 

Old-age pension savings – Pillar 2 (DSS)

A portion of the Pillar 1 pension insurance contributions is invested through a pension management company (DSS) and your pension can thus increase in value by yields from the investments.

Supplementary Pension Saving? - Pillar 3 (DDS)

Supplementary Pension Saving (DDS) to which employers can also contribute. Thanks to the tax relief it is favorable for all and it can provide the missing bit of income if set up adequately.

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