Slovak Prime Minister Fico takes on pension fund managers

Slovak Prime Minister Robert Fico has sharply criticised private capital and managers of pension funds. He accuses them of endangering the pensions of Slovak workers.

Mr Fico's harsh words follow the ministry of labour's plans to adjust what is known as the "second capitalization pillar" in the pension system - the main domain of the pension fund management companies. Premier Fico claims the private funds have made losses during their first two years of operation and, he says, this endangers the pensions of millions of ordinary people.

FICO: "The economic results of the pension fund management companies are available today. These companies have really interesting economic results in the years 2005 and 2006. They have allocated a loss which is constantly rising. There is a risk that citizens, when reaching retirement age, will not even get back the money they have invested."

However the association of pension companies rejects the criticism. Their President Peter Socha says Mr. Fico does not understand how the pension system works.

"These statements only prove that Mr. Fico doesn't really understand the system. Clients' money is completely separated from the financial resources of the pension fund management companies. The reason why these companies are in the red is very simple - The system has only started working and they are basically subsidizing it. The system needs initial investments."

Prime Minister Fico advises clients to abandon pension fund management companies and rather transfer their savings to the state owned Sociálna Poistovna insurer. The amendment to the law prepared by the Ministry of Labor is designed to allow people to withdraw their money from the private system something they are currently not able to do..

FICO: "This law adjustment should open up the system in the period from January 1st until the 30th of June 2008. These six months would leave Slovak citizens the option to leave the system, just like anyone would have the option to enter it. The system will be definitely closed after the end of June and every client will have to deal with all the risks connected with the private pension fund management companies."

"The Governor of the Slovak Central Bank has backed the association of Pension-saving Companies. According to him, the money which people invested in these companies is completely safe.

"The whole system is very safe. It has several levels of control. Besides the internal control of the pension saving companies, there are also auditors and deposit banks that also have the duty to control the system. At the end, there is also the Slovak Central Bank that monitors all operations on the financial market. There is a strict rule that the investments of people have to be separated from the internal economy of pension saving companies. The system is regulated under very strict controls."

The Slovak Prime Minister is now facing strong criticism on several fronts - especially after he accused media of being corrupted by pension fund management companies. Lawyers are also questioning the legality of the way in which the premier acquired information on the financial results of the fund management companies. Despite all this, his Smer Social Democratic party continues to enjoy high public approval ratings.