Is begging for good? Czech pension savings stands out in its shortcomings

SDo you want to retire? You should be commended for taking a responsible approach to your financial security. But that’s where the good news ends for most people. Although regular contributions to the pension fund have a pleasant advantage in the form of a state contribution and the possibility of tax deductions, otherwise the view of their performance is very sad. High fees don’t inspire confidence either. Fortunately, since the New Year, there is an opportunity to choose a more favorable strategy.

There can be no dispute about the importance of saving free funds for senior citizens. News of 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 is once again frozen in a deadlock and above all resembles the proverbial waiting for the dot. Saving on your own print is undoubtedly essential. Unfortunately, the situation with pension funds in the Czech Republic is also not happy. Especially the person contributing to them.

As the National Budget Council points out, Czech pension funds are among the most conservative within the OECD, dominating government bonds and holding a minimal share of stocks. Only developing countries are worse off. This is also reflected in their yields, which dominate the bottom line of benchmarks in both real and nominal terms. At the same time, the profitability of Czech pension funds has long been negative in real terms, so unless additional pension insurance is supported by state contributions, it clearly does not fulfill the function of saving for the elderly.

To make matters worse, pension funds use their altruistic position to crush savings with high fees for both management and profits. The past few months, marked by inflation, haven’t helped either. How to get out of it? Starting from the new year, citizens can opt for a long-term investment product, known by the acronym DIP, which is very advantageous in all respects. But the government has only one option – to increase market competition, transparency, support more effective investment strategies and ensure a fair fee structure.

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