Differences between pension pillars

1st pension pillar – state compulsory unfunded or non-accumulated pension scheme. This pillar means that the social security contributions paid from your salary are accounted to your pension, as well as payed to the existing generation of pensioners. It foresees – the longer you will be working and paying social security contributions, the bigger pension you will receive in old age.

2nd pension pillar – state funded or accumulated pension scheme. Its aim is to increase your pension capital and the amount of the pension itself, part of the social contributions accumulating and investing in the financial and capital market – securities and bank deposits.

3rd pension pillar – private voluntary pension scheme. It ensures the possibility according to free choice to create additional savings for your pension, making individual contributions or to channel through your employer part of your income to the private pension funds.

So, the money that is paid to the 1st pillar is used for payment of pensions to the existing generation, as well as listed for your pension, but the money that is paid to the 2nd and the 3rd pillar will only be used for accumulation, increase and payment of your pension capital.


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