Abstract
Standard pay-as-you-go pension system is facing long-term and short-term sustainability challenges in several countries. Possible replacement of standard pension system might be in a form of private pension savings. Private pension savings are meaningful only if they provide sufficiently high returns. The aim of this manuscript is to analyse performance of Slovak pension funds and factors impacting this performance, especially government interventions. This manuscript is focused on enhanced Carhart four-factor model, Bollen and Busse four-factor model, and Fama and French five-factor model based on 23 pension funds from Slovakia from period starting September 2012 and ending September 2019. These models have been extended by other variables describing bond market factors and impact of regulatory interventions on performance of pension funds. Results of analysis have proved that legislative interventions have impact on performance of analysed pension funds. Each legislative intervention has caused average daily yield to decrease by about 0.01% to 0.03%. Findings described in this manuscript can contribute to better knowledge of pension funds for both contributors who need to decide whether to participate in the second pillar or not, as well as for regulators who develop legislation measurements in this area.
Highlights
Changes in demographic trends and aging population have negatively affected multiple pension systems across Europe
Net asset value managed by private pension system equals 9.8 billion Euro as of September 2019
Public finances have been threatened by negative demographic developments
Summary
Changes in demographic trends and aging population have negatively affected multiple pension systems across Europe. The pay-as-you-go system (PAYG) has been inevitably transformed in several countries into private pension savings systems in order to ensure the sustainability of pension payments in the future. More than thirty countries – predominantly in Central and Eastern Europe (CEE) and Latin America – partly replaced their public pension systems with mandatory private retirement accounts managed by. Org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
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