TNBiz (TNBiz)
Pension insurance  |  January 02, 2013 15:22:39

GUIDE pension reform in 2013: What's the first, second and third pension pillar?

Pension reform, which pushed the government of Petr Necas, allows so-called three pillars of savings. Pillars basically mean types of income in retirement.

The first pillar is an ongoing pension system as we know it now, thus doing a part of their income in retirement. The second pillar, which will enter into force from 1 January 2013, brings the scene pension companies and the principle of the Republic for putting the first pillar payments to private accounts. The third pillar counts with its own investments and savings of the population and it is an already existing form of pension.

First The first pillar of the pension reform

The first pillar - state continuous - still remains the main source for the payment of pensions.At the same time, however, should gradually move the retirement age, which according to the information center governments avoided due to increasing life expectancy. This applies, for example, that people born after 1977 will be their retirement defer each year by two months. To illustrate: childless women born in 1984 would have to retire in 68 years.

Second The second pillar of pension reform

What is the second pillar?

The most discussed and criticized the so-called second pillar of the pension reform. He enters into force on 1 January 2013. Lets carry on part of mandatory contributions to the first pillar to private accounts. So far, people paid their pensions for 28 percent of gross salary. Newly if they want to, because entry is voluntary, the state will do 25 percent of their gross wages, and three percent will be able to transfer to the pension fund.

But! This must people of their salary to add another two percent of their gross monthly salary!

Another problem is that when you decide to join the second pillar, have it you can never get out!

Pension funds will be from January to offer four types of compulsory pension funds, according to the degree of risk and the level of interest. So we can invest in a dynamic, balanced or conservative fund or government bonds. It can be said that for a shorter period of participation in the second pillar savings (up to 10 years) would be appropriate and conservative strategy for younger participants, or dynamic balance.

Who can join the second pillar?

New agreements on pension savings can be closed from 1 January 2013. People over 35 years, but must decide whether to enter the second pillar or not later than 28 June 2013.

Agreement on savings in the second pillar of the pension reform can not reach the unemployed, mothers on maternity leave and long Czechs living abroad.

How savings will be protected?

Resources would fund the second pillar should be separated from the property manager (pension companies). With the property manager clients will not have himself. All operations with money and securities participants will be instructed to perform administrator depository (bank, which was to have all the funds in escrow). Depositary should examine every transaction, whether it is in accordance with the law and for the effective control of its assets reply.The administrator and the Depositary will oversee the Czech National Bank.

How the money will be paid from the second pillar?

Money from the second pillar of the pension reform will be paid either in the form of life annuities (after the death of a payout should quit), or annuities with survivor's pension for three years, ie. that in the event of death of the beneficiary should be paid to survivors pension of the same amount. A third option would be in the form of annuity payments for at least 20 years of age.

In this case, if the recipient died during pumping, payment will continue, with the survivor's pension in the same amount. If the participant voluntary system died during the savings phase - that is, before the start of the draw - should become part of the money by succession and not to fall state.

Who pays the second pillar?

According to the views of most economists, participation in the second pillar, despite government proclamations, not cost! The new system is basically pays primarily for people with higher incomes and more men than women.

In the second pillar, in essence, the equation, the higher the income you have and you are younger, the more you enter this part of the pension reform pays off. For example, for people older than 45 years, the entrance to the second pillar paid only if they have an above-average wages. People under forty-five years, the second pension pillar can pay if they have a slightly below-average incomes.

If you are deciding whether to join or not to join the second pillar of the pension reform, think all the math.

For some people it is advantageous to save his own way, to enter into the third pillar. Althoughman in his thirties with a gross wage of 25,000 crowns was given for participation in the second pillar of the reform (balanced fund with a yield of 3.5 percent) for 1,017 crowns more, far higher pension would have had them to save himself without help from the state. In the event that 500 crowns invested l instead of the second pillar on their own savings as well, she would receive in retirement 14,135 crowns, which is about 529 crowns more than in the second pillar. Would be even more significant savings on their own man earned higher incomes than 25,000 .

Similarly, self worth saving and forty years of men, there would be earned on their own savings.Higher income you receive, even if you come from the proceeds of conservative funds (1.5%), but there are differences a bit smaller.

The second pillar can secede

One of the sticking points of the second pillar is the fact that although access to it is voluntary, can not leave him.

Third The third pillar of pension reform

From 1 January 2013 will change pension system, which is considered as the third pillar of the pension reform. Changes to motivate people to a higher state contribution to greater savings and permit a change of contract various forms of investment funds.

The most radical change in the pension scheme is a change of state contributions, while up to now you have received state subsidies, even if you have saved for only 100 crowns. From January it will not be possible.State contribution to the New Year will be paid only when saving 300 or more crowns.

Since January, changes the amount of state contribution will pay, the more you save, the more contribution you get. A detailed overview can be found in the table.

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PRŮVODCE penzijní reformou v roce 2013: Co je první, druhý a třetí důchodový pilíř?

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