Slovakia is the first in the Union to introduce a pan-European pension innovation, the pension can be an order of magnitude higher (+ examples) – Country – Economy
Slovaks will be the first to get a pan-European pension product. Minister of Labour, Social Affairs and Family Milan Krajniak (We are a family) with investment and pensions expert Ján Šeb and CEO of Finax Juraj Hrbatý stated that the European pension is already a reality. This step should contribute to increasing the competition of voluntary savings in Europe.
It’s been ten years since the European Commission came up with a proposal to create a retirement savings account that people can contribute to – regardless of where they work. The Pan-European Personal Pension Product (PEPP) is based on a regulation of the European Parliament from 2019. The necessary legislation regarding the pan-European pension product was adopted by Slovakia at the beginning of this year. Now the novelty is being put into practice.
Slovaks therefore represent a chance to increase their pension savings, regardless of the state in which they are located. “In the history of Slovakia, we can see that we tend not to notice the successes that we manage to achieve. This first place also proves to us that we have something to be proud of. Because it was a young, promising Slovak company that managed to achieve a pan-European pension product and secure the value of citizens’ money. This method of saving can be advantageous, for example, for citizens of Slovakia living in European Union states, because they will be able to transfer their savings between individual countries,” says Milan Krajniak.
Denník Pravda prepared a brief overview of the European pension in the form of questions and answers.
What is PEPP?
PEPP is expected to replace the third pension pillar in Slovakia. While II. and III. pillar are national pension savings schemes to which Slovak laws apply, PEPP is bound only by European legislation, he states on his website europskydochodok.sk.
That is, saving is completely independent of the political situation and the decisions of individual governments. In the event that something happens on the political scene, the saving remains stable despite this, and the saver knows at every moment what can be secured by Šebo.
Read more Pensioners came to see Boris Kollár. They want higher pensions and for society to be aware
PEPP differs in the product itself, who can with lower fees, strict legislation, as well as looser conditions in the payment phase, thanks to which savers’ savings can be invested in shares and for retirement. So a citizen can save even at retirement age. The property that the saver acquires is the subject of inheritance. And savings in PEPP can also be transferred to another country in the EU.
“The performance of your savings will eventually outpace inflation,” Šebo said, adding that the probability of his claim is 99 percent.
Who is it intended for?
Mobile workers, young companies, entrepreneurs and freelancers, people with high mobility, foreign employees, companies for whom the product is suitable. Simply, to all people living in the European Union. A saver can also be an unemployed person, since the pension system is not tied to employment, or a saver on maternity leave or a student. It is voluntary and everyone can contribute the same amount.
“A pan-European pension product makes sense especially for people who work and travel within the EU during the working age. Contribute this product to other countries in the long term. However, for a meaningful expansion of this product, an intensive information campaign and strong distribution will be necessary,” Maroš Ovčarik, CEO of Partners Investment, told Pravda.
It is not tied to a place either. Its goal is to ensure the saver’s income in old age, state pension and national supplementary pillars.
This is voluntary savings, which they will be able to save to another country when they change their residence and continue saving with the same product, or they will be able to change their provider when they change their residence within the EU. It is this character that makes it interesting for multinational companies, young people and highly mobile workers in the EU.
Who provides PEPP?
Providers of the European pension can be credit institutions, supplementary pension companies, investment and management companies or managers of alternative funds. According to a survey by the European Occupational Insurance and Pensions Authority (EIOPA), up to 21 entities showed interest. However, in order to obtain permission for a PEPP product, they must, on the basis of very complex mathematical models, assess the risk and the potential appreciation of the client’s savings. The first company, as PEPP informs on its website, that acquires its provision is the securities trader Finax, which operates in Slovakia, Poland, Croatia, the Czech Republic and Hungary. “In the entire history of Slovakia’s membership in the EU, it is the first time that a Slovak financial institution was the first in Europe to present a new financial product. That is why we are proud that even a small Slovak entity such as Finax can overtake all European financial giants thanks to its innovative nature,” added Juraj Hrbatý.
How does it work?
Saving consists of two phases. The first is the saving phase. During this period, assets are being accumulated on the saver’s account. A citizen who is interested in this form of saving for retirement downloads the application and registers. Robo-advisory software (robotic, without human intervention) awaits him in the application and he can invest after the initial settings.
At the beginning of the savings, 100 percent shares in index funds are registered. While saving, he contributes to these actions. Ten years before retirement, funds are automatically changed and the portfolio is moved to more guaranteed funds, such as bond funds. In retirement, he can even still invest in stocks in the ratio of 60 percent stocks and 40 percent bonds.
Read more Šeliga: The coalition has agreed, help for seniors will be introduced in the center
For transparency, the saver will be informed in detail about costs, investment strategy, risks, returns, transactions, as well as pension benefits. The maximum amount of all fees paid by savers – as stated by Hrbatý – is set at one percent of the amount of the acquired capital.
The second phase is paying. Here, the saver finds himself in the period of drawing down his built-up assets. He has the option to choose how he will be paid. For example, in the form of an annuity, which means that the benefit will be paid to him at certain intervals. Alternatively, a one-time payment or combined.
The saver contributes to the European pension himself, or his employer can also contribute. In Slovakia, the saver’s contributions to the European pension will be deducted from the tax base up to 180 euros per year.