For goodness to beggary? Czech pension savings stands out in its disadvantages

WITHAre you looking for retirement? Then you are to be commended for taking a responsible approach to your financial security. But that’s where the good news ends for most people. Regular contributions to the pension fund do have a pleasant advantage in the form of a state contribution and the possibility of tax deductions, but otherwise the view of their performance is rather sad. High fees will not add to optimism either. Fortunately, since the New Year, there is an opportunity to choose a more advantageous strategy.

There can be no dispute about the importance of saving free funds for old age. News about the unfortunate development of the state pension system is pouring in on us from all sides, and the implementation of the much-needed pension reform has once again frozen at a standstill and most of all resembles the proverbial waiting for Godot. Saving on your own axis is thus undoubtedly a must. Unfortunately, even the situation of pension funds in the Czech Republic is nothing to be happy about. Especially the person who contributes to them.

As the National Budget Council points out, Czech pension funds are among the most conservative within the OECD, with a dominant focus on government bonds and a minimal share of stocks. Only developing countries are worse off. This is also reflected in their yields, which also dominate the bottom of the benchmarks, both in real and nominal terms. At the same time, the profitability of Czech pension funds has been negative for a long time in real terms, so if supplementary pension insurance were not supported by state contributions, it would clearly not fulfill the function of saving for old age.

To make matters worse, pension funds take advantage of their oligopolistic position, crushing savings even with high fees for both management and profits. The past months, marked by inflation, did not help either. How to get out of it? Starting in the New Year, citizens can choose a long-term investment product, known by the abbreviation DIP, which is more advantageous in all respects. But the state has only one option – to increase market competition, transparency, support more effective investment strategies and ensure a fairer fee structure.