Slovak pension system faces market volatility and demographic risks

The Slovak pension system faces challenges regarding investment concentration and long-term sustainability. Over two million Slovaks participate in the second pension pillar, which manages over €21 billion. Due to the default investment strategy, more than 80% of these assets are held in index funds that mirror global stock indices.

This creates significant exposure to a small number of companies. For example, in the MSCI World index, just seven companies account for approximately 24% of the total value, with much of this driven by the artificial intelligence sector. Recent market volatility demonstrated this risk, as assets in the pillar dropped from €17.6 billion to below €15 billion within weeks during a market downturn.

Separately, while Slovakia maintains a relatively high pension replacement rate—with a net rate of 76.3% compared to the OECD average of 63%—the actual standard of living for retirees remains lower than in Western European countries like Austria. Additionally, Slovakia faces demographic pressures, with a growing number of retirees and a shrinking pool of contributors to support the system.