Why the Czechs go gainst the stream? Jiri Rusnok, ING Czech and Slovak Republics President, Association of Pension funds of the Czech R.

1. Pension reform in Czech Republic Why the Czechs go gainst the stream? Jiri Rusnok, ING Czech and Slovak Republics President, Association of Pension funds of the Czech R. 21. November, 2011 CONFERENCE of STABILITÁS, Budapest

5. Retirement age - timetable After the last amendment of the law in 2011 2031 2041

6. Structure of Czech Pension System - today ING I.pillar PAYG State admin. (ČSSZ) Contr.Rate 28% Exependiture cca 350 bn.CZK ≈ 9,2% GDP (of which about 80 % old age benefits) III.Pilar Supplementary Pension Insurance with State Support FF (DC) Private Admin. (PF ,a.s.) AuM ≈ 250 bn. CZK < 5% of GDP III.Pillar Life Insurance FF Private Admin. (LI companies) General = mandatory Supplementary = voluntary

7. I.Pillar - replacment rate: average out-paid old-age pension to average gross/net salary Source:MLSA of the Czech R.

8. Almost flat rate – newly granted old-age pension to pre-retirement wages Gross salary Net salary Source:MLSA of the Czech R.

9. Cumulative distribution of persons according to the gross wage in % Source: MLSA of the Czech R. Fold of the average wage

12. Structure of Czech Pension System – since 2013 ING III.Pilar Supplementary Pension Insurance with State Support FF (DC) Private Admin. (PF ,a.s.) AuM ≈ 250 bn. CZK < 5% of GDP General = mandatory Supplementary = voluntary II.Pillar Pensions´Savings Contr.rate 2%+3% FF (DC) Admin = P rivate Pension Company Start: January 2013 I.pillar PAYG State admin. (ČSSZ) Contr.Rate 28% Exependiture cca 350 bn.CZK ≈ 9,2% GDP (of which about 80 % old age benefits) III.Pillar Life Insurance FF Private Admin. (LI companies)

13. Expected New Architecture of Private Pensions Current PF New Investor Pension Management Company (PC) Transf ormed Fund Conservative F. Other F. I Other F. II Conservative F. Balanced F. Growth F. Gov. Bonds F. III. pillar II. pillar Must be established: ___ manadatory ----- voluntary 2%+3% Clients contributions + State contr.+ Employers contr.

17. New architecture in II. pillar 3%+2% = 5% of a gross salary AuM fees and Performance fess No Performance Fee Performance Fee Gov.Bonds F. Conservative F. Balanced F. Growth F. Current PF Pension Management Company (PC) N ew Investor management fee + performance fee AuM Fee % 0,3 0,4 0,5 0,6 Perf.Fee % NO 10 10 10

18. New architecture in III. pillar Current PF ,a.s. N ew investor Pension Management Company (PC) Transf ormed. F . C on s ervativ F. Other F. 1 Other F. 2 Other F. 3 Contribution of planholders+ state contr. + employers´contribution AuM fee + Performance fee AuM Fee % 0,6 0,4 0,8 0,8 0,8 Perf.Fee % 15 10 10 10 10

22. Thank you for your attention Contacts: j iri. r [email_address]