Pension Funds
Pension funds are designed to provide a supplementary retirement income, in addition to the pension granted by public social security systems.
While state pensions typically operate on a redistribution model - where current workers fund the pensions of retirees - pension funds follow the capitalisation principle. This means that individuals contribute a portion of their income during their working life, which is then invested based on their risk profile.
At the end of the contract - usually long-term and ideally covering the full working life - the policyholder receives a monthly annuity. The amount depends on the total contributions, the duration of the policy, and the investment returns.
There are two main types of pension funds:
- Open funds: available to all workers, regardless of profession.
- Closed (or negotiated) funds: reserved for specific professional categories, established through agreements between trade unions and employer organizations.
In addition, individual supplementary pension plans are available for anyone wishing to build a personal retirement fund - including students or those not currently employed. These plans offer greater flexibility, allowing contributors to pause and resume payments without penalties. However, benefit payouts are subject to the same regulatory constraints as collective funds (e.g., full lump-sum withdrawals are generally not permitted).