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IMPACT OF DIFFERENT LIFE-CYCLE SAVING STRATEGIES AND UNEMPLOYMENT ON INDIVIDUAL SAVINGS IN DEFINED CONTRIBUTION PENSION SCHEME IN SLOVAKIA

Michal Mešťan, Ivan Králik, Leoš Šafár, Ján Šebo

Individuals in mandatory pension saving (MPS) scheme in Slovakia have their savings allocated mostly in one of the pension funds – equity or bond funds. Saving in only one of these funds will be considered as benchmark strategies. In our article, our goal is to compare the profitability that can be achieved with benchmark strategies compared to life-cycle savings strategies. In their case, the ratio of savings between equity and bond components changes dynamically, depending on the age and remaining savings period of 40 years (480 months). We deal with 3 types of individuals with different education level. In addition to comparing the potentially achievable returns at the end of the saving horizon, we will also be interested in the volatility of achievable returns and their spread from the average with the selected savings strategies. Savers are trying to get the best value for money, but they should also take into account the fact that higher potential appreciation also entails higher risk.
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