Star Capital Finance, s.r.o.

Transcription

1 The Pension Reform Star Capital Finance, s.r.o. Václavské náměstí 19, Prague 1, Czech Republic tel.: , fax: , The Company is regulated by the Czech National Bank and is a member of FEIFA.

2 Content The Reasons for The Pension Reform The Goals of The Pension Reform Three Pillars of The Pension Insurance Products for Pension Savings

3 Age structure in time

4 Dependence on pension

5 The Story 3 key questions: 1) Do you save? 2) For what purpose? Why do you save? 3) How do you save? I have another way of saving for you. Let s make a comparison: 1000,- / month Savings, regular investment penzijko = III.pillar Monthly Growth 5% 3% 0% above inflation 2% Contribution of state Amount from a Thousand invested in 30 years employer (if you are lucky) or 2230 (if you are lucky) Retirement in 30 years Source: Pension Savings = II.pillar 1500 certainly 2500 certainly Amount in 30 years i.e (if you are lucky)

6 Reasons for Pension Reform The Pension Deficit The number of Czech residents over 65 years of age will double in the next years To maintain the current level of pensions significant pensions account deficit would need to be addressed Year Income from the pension insurance contributions (bn. CZK) Expenses from the pension insurance contributions (bn. CZK) Difference Source: ČTK Source: Raiffeisen Penzijni Spolecnost

7 Goals of Pension Reform To stabilize finance in the long-term To maintain social stability To encourage people toward greater personal responsibility

8 Three Pillars of Pension The New Pension I Pillar Present (PAYG) II Pillar Pension Savings Act No. 426/2011 Coll. III Pillar Voluntary Pension Savings Act No. 427/2011 Coll.

9 First Pillar of Pension I Pillar Continuous (PAYG) Mandatory, still financed by tax and social payments Change in rates, starting in 2013: 28% of the gross income, if not in the II pillar 25% of the gross income, if entered the II pillar Self-employed persons are contributing 29.2% of 50% of their annual profit in 2013.

10 Second Pillar of Pension II Pillar Pension Savings Act No. 426/2011 Coll. Entry into the scheme is voluntary; once in, the member is obliged to stay until the pension age Abstention only the I pillar + voluntarily III pillar Participation 3% of the gross income + additional 2% Investment funds with 4 strategies: government bond, conservative, balanced, dynamic.

11 Second Pillar of Pension Pension Savings Pension company Has a licence and is strictly regulated by the CNB and the Ministry of Finance Collects, manages and invests clients funds into pension funds The wealth is determined in so-called pension units. Who can enter into the II Pillar? People between the ages of years can apply at any time but at latest by the end of the calendar year in which they turn 35 years of age People older 35 years can apply for the savings only before June 30, NOT later An individual who has already retired cannot contribute. The entry into the II Pillar is voluntary. After entering the II Pillar, it is not possible to withdraw from it but the client is allowed to transfer to a different pension company.

12 Second Pillar of Pension Pension Savings The money in the II Pillar are invested until the client s retirement age. When the retirement age is reached, the saved funds are, as decided by the client, transferred to an insurance company which will be paying him/her a monthly contribution to the state pension. Annual fees asset managers charge its clients: Name of the Fund Mgmt. Charge Share from Profit Government Bond Pension Fund 0.3% - Conservative Pension Fund 0.4% 10% Balanced Pension Fund 0.5% 10% Dynamic Pension Fund 0.6% 10%

13 Second Pillar of Pension - Illustration Income of CZK 50,000 (gross) Abstention from the II Pillar Participation in the II Pillar CZK 14,000 from income CZK 12,500 from income CZK 1,500 from income Pension Fund Present CZK 1,000 from private funds

14 Second Pillar of Pension Drawing Funds Settlement of Claims Retirement benefits from the I Pillar and II Pillar are available at the same time. Benefits from the II Pillar are payable with the following options: Lifetime pension; Lifetime pension with an agreed payment of survivor's pension for 3 years (with a specified authorized person); Pension payable for a period of 20 years. Important: in the event of death of the participant during the saving period, resources in the fund become subject of inheritance. Compared to the funds in the Continuous where the funds are forfeited to the State. In the event of death in case of the pension for 20 years, the undrawn capital value becomes subject to inheritance too. II Pillar pension is suitable for transfers into recognised Self Invested Personal Pension (SIPP) & Qualified Recognised Overseas Pension (QROP) schemes

15 Second Pillar of Pension Summary II Pillar creates wealth that will always belong to retiree and their family. Realistically more pension funds will be available (in years, the pensions from the I Pillar will be significantly lower). In the long term, the division into two pillars would provide more retirement money. The Pension Savings is secured by strict rules, the law and the supervision of CNB Clear and transparent when compared to other forms of investment, low charges. One can choose and change the strategy of investment.

16 Third Pillar of Pension III Pillar Voluntary Pension Savings Builds on the existing supplementary pension scheme No changes of the existing agreements on supplementary pension New funds with various investment profiles Possible to withdraw anytime and to pay any contributions Change of the state contribution and the limits of Act No. 427/2011 Coll. tax relief for all clients

17 Insurance Products for Pension Savings The amount of insurance premium - CZK 50 per month (CZK 600 per year); paid annually. Risks Permanent Disability Insurance Indemnity Payment of the last known amount of contribution to the pension company until retirement age Form of Payment One-off amount to the client s account up to retirement age Easy to arrange insurance directly on the Form of Pension Savings. No medical examination required, the client only confirms his/her health condition by health statement. Temporary Disability Job Loss Payment of the last known amount of contribution to the pension company Payment of the last known amount of contribution to the pension company Regularly up to 12 months to the client s account Regularly up to 12 months to the client s account

18 Questions?

19 Thank you for your attention! Josef Malíř