The first pillar and the old-age pension

Every working citizen who is required to pay contributions to the Social Insurance Agency (Sociálna poisťovňa) contributes to the first pillar.

The first pillar is built on the principle that the money collected through contributions is used to fund the pensions of today’s pensioners. The money is not saved in the citizen’s own individual account, as it is in the second or third pillar.

Pension insurance consists of two distinct, separately funded subsystems administered by the Social Insurance Agency:

• old-age insurance, which secures an income in old age and covers the event of death,
• disability insurance, which covers a decline in the insured person’s ability to work due to a long-term adverse health condition, and the event of death.

This is compulsory insurance, and participation in it arises directly by law. The Social Insurance Act, however, also allows voluntary pension insurance.

The old-age insurance system provides:

• old-age,
• early old-age,
• widow’s, widower’s and orphan’s pensions.

The disability insurance system provides:

• disability pensions,
• widow’s, widower’s and orphan’s pensions.

WHAT AFFECTS THE AMOUNT OF YOUR FUTURE PENSION

1. Retirement age
   Entitlement to an old-age pension is conditional on reaching retirement age and having worked for at least 15 years.
2. General assessment base
   This is 12 times the average monthly wage in the Slovak economy as determined by the Statistical Office (Štatistický úrad) for the relevant calendar year; it currently stands at €13,596.
3. Years worked
   These also include voluntary pension insurance, periods of service as a police officer, a professional soldier and a soldier in preparatory service, periods of receiving a disability pension after 31 December 2007 until reaching retirement age or until an early pension is granted, and periods acquired before 1 January 2004 as periods of employment and substitute periods.
4. Current pension value
   This is one of the three key variables in calculating the pension, and the value used is the one valid in the year in which entitlement to payment arose. It is set by the labour ministry in a ministerial measure. This year it amounts to €15.1300.
5. Personal wage point
   This is determined for each year of the decisive period (since 1 July 2005, the decisive period has covered the years from 1 January 1984 up to the year preceding the year in which the person met the conditions for entitlement to a pension. For example, if you meet the conditions for entitlement to an old-age pension in 2016, the decisive period from which the average personal wage point is calculated will be the years 1984 to 2015). It is calculated as the ratio of the personal assessment base achieved by the insured person in the relevant year to the general assessment base for that year.
6. Personal assessment base
   This is the total of the insured person’s gross wages for the years from which pension insurance contributions were paid, or from which pension insurance contributions are deemed to have been paid.
7. Average personal wage point
   Together with the years worked and the current pension value, it makes up the trio of basic variables used to calculate the pension. It is determined as the ratio of the sum of the personal wage points calculated for the individual years of the decisive period to the number of years worked. This, in effect, gives the average personal wage point for one year. 68% of the value of the average personal wage point between 1.25 and 3 is counted; where the average personal wage point is lower than 1.0, 20% of the difference between 1.0 and the average personal wage point is added to it.

CALCULATION EXAMPLES

Example 1: The insured person has met the conditions for entitlement to an old-age pension. Their average personal wage point is 1.0012 (meaning their earnings were at the level of the average wage). They worked 43.6768 years (15,942 / 365 = 43.6768). The current pension value is €15.1300.

Pension: 1.0012 × 43.6768 × 15.1300 = €661.70.

The pension is then increased through indexation by €8.60 a month, to €670.30 a month.

Example 2: The insured person has met the conditions for entitlement to an old-age pension. Their average personal wage point is 0.5416. They worked 43.8028 years. The current pension value is €15.1300.

Pension: 0.5416 × 43.8028 × 15.1300 = €359.00 a month.

The pension is then increased through indexation – by €4.70 a month, to €363.60 a month.

Source: Social Insurance Agency