In my work, I have discovered some pretty serious mistakes that people make in retirement savings through supplementary pension savings (DDS). That is why they are wasting money unnecessarily. In this article, I will describe and provide guidance on how to avoid them. I will go the way of brevity and simplicity as this topic allows me. I will not describe all the details, but I will write the essence.
I would like to point out that the concepts of supplementary pension saving, DDS and the third pillar will be revolving here. It’s not 3 different things. It’s still the same.
I made a small selection and I chose only 4 basic mistakes that were repeated for most people.
Are you entitled to a contribution from your employer, but do not have a contract with DDS?
Last month I ran a number of consultations on pensions. One of them was engraved a little more than the others. Why? I will try to rewrite a part of the interview that accurately reflects the nature of this serious error.
I’m not a writer, just do not look juicy introductory phrases for direct speech. They will only be dry questions and answers, but they will express the essence of it.
Have you calculated how much this person came when he did not use the employer’s contribution to the third pillar? Normally I’m scared to write here. It’s a huge sum.
TIP how to avoid this error:
Find out if your employer contributes to the third pillar. If you do not have a DDS contract yet, then it will make sense for you to close it. You will not be giving up your employer.
Do you have a contract with DDS, but does the employer not give you a contribution?
This is the opposite situation when people save on retirement in supplementary pension saving, but only their own money and the employer does not give them absolutely no contribution.
Why do I consider it a mistake? Funds in DDS offer low yields and, in addition, revenues excessively high. At the same time, DDS is limited in its ability to handle invested money.
If you only invest your own money, you can invest directly in funds where you get higher returns and lower fees. As an example, I presented a portfolio of 3 equity funds that target advanced markets and invest globally.
TIP how to avoid this error:
If your employer does not contribute anything to the DDS, you do not have to send any money there (maximum to use tax savings, but we can also argue). Instead, you can invest your money in funds outside the DDS, eg into a similar portfolio as shown above.
Are you investing in low-yield funds?
Supplementary pension companies are not the best in managing pension funds in the 3rd pillar. Perhaps it will be that money from employers is flowing there and clients send money there because of their contributions.
You can choose equity or index funds to get higher revenue potential. In my opinion, the appropriate choice may be index funds, the pension fund managers do not have anything to ruin.
Index funds invest in other ETF funds. Eg one of the third pillar index funds invests in the ETF, the results of which are shown in the figure below.