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Only 13% of people use supplementary pension savings. Is it convenient?

Only 13% of people use supplementary pension savings. Is it convenient? In the state supported III. Pension pillar saves a retirement of 4.5 million people, of which only 13% of supplementary pension savings. Is it worthwhile to switch from a supplementary pension scheme to a supplementary pension scheme?

Self-retirement savings in the third pension pillar are supported by the state in fulfilling the statutory conditions in the form of a monthly state contribution, in the form of tax deductions and tax exemptions for employers' contributions to the contract. Among products III. The pension pillar includes supplementary pension insurance and supplementary pension savings. State aid for both products is quite the same but from 2013 pension insurance can no longer be closed. "It is possible to move from a supplementary pension scheme to a supplementary pension savings, the administration is simple and it is especially payable to younger people," explains Emil Broz (FinFocus).

Non-competitive appreciation inhibits returns

In the case of supplementary pension schemes, pension companies can not attribute negative appreciation to their clients. This means that the investment opportunities are very limited and that the annual return on retirement benefits can never be high and the main goal is to defeat annual inflation. Thus, in the long-term investment horizon, supplementary pension savings are more advantageous, with a more interesting appreciation, more than 5% per year. "In the case of supplementary pension savings, it is possible to choose an investment strategy and change over the years, younger clients can choose a dynamic option and subsequently move to a conservative age at a later age," adds Emil Broz.

To make a prepayment is a necessity change

The popularity of pre-pensions is growing slowly, and in the future we can expect an even greater interest in this monetary form of drawing money from supplementary pension savings. The main advantage of the pre-retirement is that it is possible to avoid a financially disadvantageous early retirement while not being in the pre-retirement age without financial means, while health insurance is paid by the state. Up to 5 years before the normal retirement age, a man of the same birth year may be retired before retirement. The monthly retirement amount must be at least 30% of the average wage. Pre-retirement can only be drawn from supplementary pension savings. Clients wishing to benefit from a pre-retirement pension and have a supplementary pension insurance contract must "convert" their contract to supplementary pension savings. "The brunt of the massive drawdown of early retirement is low savings on the contract. It is therefore appropriate to save at least CZK 1,000 per month, which brings the monthly maximum state allowance of CZK 230 and still have a contribution from the employer, which is favorable for both employers and employees, "adds Emil Broz.

Employers contribute little

A pleasant legislative novelty for 2017 was an increase in the annual tax exemption for employers' contributions to state-sponsored financial products from CZK 30,000 to CZK 50,000, including III. Pension pillar. No taxes, neither the employee nor the employer, are subject to taxes. It is definitely worthwhile to use this tax advantage. Employers' involvement in retirement savings for employees is very important. "Employees, however, on contract III. The pension pillar is contributed by only one fifth of employers, and the average monthly allowance is only about CZK 800 and therefore the tax exemption amount is far from being exhausted. Employees should not only act as an employer to increase gross wages but also to increase their contribution to their contract, " notes Emil Brož.

Source: tz, edited editorially

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