In the past year, individuals who had invested in pension insurance experienced higher returns compared to the previous year. However, despite this improvement, the returns on most pension funds remained relatively low, ranging from one to two percent. These returns fell significantly short of the average inflation rate of 15.1 percent in the same period. As a result, the deposits of more than 2.7 million Czech citizens who continue to save in these funds have been devalued by over twenty percent over the past decade in most cases.

An analysis conducted by Freedom Financial Services (FFS) revealed that only Conseq Pension Company offered an above-average interest rate of 4.4 percent last year. However, when considering inflation, the actual yield of this transformed fund over the past ten years was a negative 19.43 percent, which is a concerning outcome for any client.

Moreover, the Czech National Bank predicts an average inflation rate of over 11 percent for this year. In contrast, the return on conservative pension savings is expected to remain in the single digits. Nonetheless, Vladimir Jerabek, Chairman of the Board at KB Pension Company, expressed optimism that the situation would improve. He stated that new investments in transformed funds are being made with current interest rates, and returns are gradually expected to approach the 2.5 percent level in the coming years.

Transformed funds have consistently failed to outperform inflation since 2016 when the average yield was 0.8 percent, slightly below the 0.7 percent price increase. Due to their highly conservative strategies, transformed funds fall behind inflation. Unlike new participant funds that allow for different investment strategies, transformed funds are legally obligated to safeguard savings and avoid reducing their value. Czech citizens have a total of CZK 463.8 billion invested in transformed funds.

Even participants in additional pension savings were disappointed with the returns of the previous year. Most participant funds, where approximately 1.6 million individuals save and invest, experienced lower returns. While these funds have more flexibility in investment strategies, they are still significantly impacted by inflation, highlighting the ongoing challenge of maintaining the value of pension savings.

Article by Prague Forum