The majority of people in Slovakia save on retirement products in disadvantageous products. I decided to write this article just to make people think about what they are putting their money into. Read about which financial products are losing you money and that you really earn.
Supplementary pension saving only with employer’s contribution
DDS is worthwhile if your employer also contributes to it. You can then get money from an employer that you would not otherwise get. The big disadvantage is that after changing the conditions, you will only have access to the money when you start retirement pension in the social insurance company.
In my opinion, the tax reliefs, which are again in force since 1 January 2014, are just such a failure of the advantage. € 34 per year is a ridiculous amount if the price is because you have money blocked and you do not have access to it. In addition, if your employer stops contributing to you, the justification for saving in the DDS is lost.
Life pension insurance rather not
Life insurance savings are expensive and disadvantageous. Capital life insurance now guarantees a net loss. Indeed, insurance premiums almost completely erase the guaranteed yield of 1.9% pa
Older insurance contracts, where there was a guarantee of higher appreciation, in many cases even 5% pa favor insurance, but if you have a compulsory insurance cover that you do not need, you are equally miserable in terms of possible revenue.
Investment life insurance is the popular tool for creating capital for retirement in Slovakia. This is not because it is extremely advantageous. Rather, large brokerage firms lead their advisors to offer their clients and clients are somewhat accustomed to insurance and trust them more than the more efficient product with lower fees.
IE is certainly better than capital life insurance. There is a presumption of higher appreciation. Still, there are unnecessary charges in the insurance that put it at a disadvantage as a savings product. Past life insurance is in most cases cheaper than products that are on offer now.
If you already have it and you have it set up properly, as a supplement you can use it to build a retirement capital. However, there are also environmental protection schemes that will pay you off and move the money to a cheaper product.
Insurance is not the primary saving product. Insurance is primarily used for insurance cover. It is also extremely important that it is set up effectively so you pay as little as possible for fees.
Building savings is only good for a short period
Some people also use building savings for long-term retirement savings. They do not even reckon how much they can earn. Effective interest after fees is around 3.5% pa for optimum use over 6 years
Updated information on building savings can be found in this article: Building Savings in 2017.
When investing eg. however, the yield is just above 2% pa and even less in some building societies. However, it is still true that building saving is nevertheless more advantageous than capital life insurance concluded after 1 January 2014 or poorly set environmental protection in the past.
Regular investment programs are most effective
Regular investment programs for mutual funds are the cheapest and most effective way to generate capital for retirement. They are mainly transparent, where you know exactly what you pay and how much you pay. Fees are incomparably lower than for life insurance.
Unlike life insurance, you can access your account online. As a result, you can always see exactly how much you have put into saving, what fees you have paid, and what revenue you have already received. In addition, you have access to your own money at any time during your savings and when something happens, you have your money within a few days on your account and do not have to wait for your retirement.
When investing through IŽP, insurance companies often invest in the same mutual funds or in the same savings programs. However, the difference is that you do not have access to your own money in the insurance, you do not know how much you paid on the fees, you do not have online access and because of the high fees you get 1 to 2% pa lower return than if you had invested outside insurance.
Either you are alone in choosing retirement savings and rely on your experience or you can reach your financial intermediary to help you choose the right product.