Last year, people who had taken out pension insurance in the past saw higher returns compared to the previous year. The returns on most pension funds ranged from one to two percent, an improvement. However, they fell far short of inflation, which averaged 15.1 percent last year. As a result, deposits for more than 2.7 million Czechs who are still saving in these funds have, in most cases, been devalued by more than twenty percent over the past ten years.
Freedom Financial Services (FFS) analyzed the situation, and according to its findings, only Conseq Pension Company offered an above-average interest rate last year, at 4.4 percent. However, if inflation is considered, the actual yield of this transformed fund over the past ten years is minus 19.43 percent, which is not good news for any client.
Furthermore, according to the Czech National Bank, the average inflation rate is expected to be more than 11 percent this year. In contrast, the return on conservative pension savings is expected to be only in single digits. However, KB Pension Company’s chairman of the board, Vladimir Jerabek, stated last month that “expectations are that after several years of low returns due to basic interest rates close to zero, new gradual investments in the transformed fund are already being made with current interest rates and yields are improving. In the following years, returns on transformed funds will gradually approach the 2.5 percent level.”
Transformed funds had not beaten inflation with their performance since 2016 when the average yield was 0.8 percent, and the price increase was 0.7 percent. Original pension insurance cannot be entered into transformed funds anymore. They lag behind inflation due to highly conservative strategies. Unlike new participant funds, which allow for different investment strategies, they are legally responsible for not reducing savings. Czechs have a total of CZK 463.8 billion invested in transformed funds.
Even participants in additional pension savings were not pleased with last year’s returns. Due to the situation, most participant funds, in which 1.6 million people save and invest, saw lower returns. Unlike transformed funds, additional pension funds can choose between different investment strategies but are still significantly affected by inflation.