More flexible pension payouts could make retirement saving more attractive

Slovenia’s pension-saving system could become more appealing if savers gain greater flexibility over how they receive their money in retirement. That is the view of Matej Golob Matzele, chairman of the management board of Modra zavarovalnica.

“Demography is unforgiving,” he said, pointing to the number of people expected to retire in coming decades, Slovenia’s birth rate and the rules governing retirement. More people, he said, are recognizing the importance of saving for greater financial security after retirement.

Golob Matzele described voluntary supplementary pension insurance as an opportunity for both employees and employers to reduce the pressure on the pension system. Recent changes to pension legislation remove the requirement for a lifelong pension annuity and give investors somewhat more freedom to choose the level of investment risk.

He said Modra’s funds performed strongly in the first half of the year despite geopolitical changes and their impact on capital markets. Dynamic subfunds posted returns close to 12%, cautious funds around 8% and guaranteed funds approximately 3%.

With markets unpredictable and volatile, the company focuses on strategic asset allocation, including how much to invest in bonds, shares and alternative investments. It also adjusts individual purchases and sales according to its assessment of market movements.

Public employees are the only segment of the working population where supplementary pension insurance is compulsory for everyone. Their average monthly premium is about 45 euros. Among people saving through pension companies, the average is about 100 euros, while contributions to mutual pension funds managed by Modra average around 120 euros a month when public employees are excluded. Public employees can increase their contributions up to the tax-relief limit, set at 5.844% of gross pay, or 3,224 euros this year. The interview notes that low monthly premiums often leave too little accumulated capital for substantial lifetime annuities.

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Demography is unforgiving.