Pension funds returns: Pension funds returns: The case of Eastern The case of Eastern and Central Europeand Central Europe

Dariusz StańkoDariusz StańkoWarsaw School of EconomicsWarsaw School of Economics

Warsaw, 28 May 2009

2009 FIAP International Seminar „Investments and Payoutsin the Funded Pension Systems”, Warsaw 28-29 May 2009

22

Plan of this presentationPlan of this presentation purpose and range of analysispurpose and range of analysis impact of the financial crisisimpact of the financial crisis returns until Feb 2009returns until Feb 2009 investment policy and limits – impact on investment policy and limits – impact on

resultsresults Sharpe ratiosSharpe ratios accumulated returns for various cohortsaccumulated returns for various cohorts general assessment and policy general assessment and policy

recommendationsrecommendations Appendix:Appendix:

datadata methodologymethodology returns and their volatilityreturns and their volatility gross vs net results (fees)gross vs net results (fees) impact of investment of pension fundsimpact of investment of pension funds

33

1. Purpose and range of 1. Purpose and range of analysisanalysis

to to report investment resultsreport investment results obtained by obtained by pension funds from the Eastern and Central pension funds from the Eastern and Central Europe as well asEurope as well as to find explanations for such resultsto find explanations for such results to discuss the impact of pension funds’ to discuss the impact of pension funds’

investment on local capital marketsinvestment on local capital markets

to answer the question – to answer the question – Have the Have the expectations towards funded pension expectations towards funded pension systems been met?systems been met?

44

1. cont. Purpose and range of 1. cont. Purpose and range of analysisanalysis

subject of analysis: subject of analysis: mandatory pension funds in Bulgaria, Croatia, Slovakia, Romania, mandatory pension funds in Bulgaria, Croatia, Slovakia, Romania,

Poland, EstoniaPoland, Estonia voluntary pension funds in Romania and Czech Republicvoluntary pension funds in Romania and Czech Republic market as a whole, not individual fundsmarket as a whole, not individual funds semi-gross investment results (upfront fees semi-gross investment results (upfront fees notnot included) included)

time horizon: until the end of February 2009, with time horizon: until the end of February 2009, with accounting for 2008 financial crisisaccounting for 2008 financial crisis

55

22. Returns up till end of Feb . Returns up till end of Feb 20092009

all countries positive nominal accumulated all countries positive nominal accumulated returns yet effect of financial crisis highly returns yet effect of financial crisis highly visiblevisible

only countries with longest maturity (CZ, only countries with longest maturity (CZ, POL, CR) positive POL, CR) positive realreal returns – time returns – time diversification mattersdiversification matters

negative real returns – crises vs short negative real returns – crises vs short maturity (BG, SLO, RO) and conservative maturity (BG, SLO, RO) and conservative asset allocation (EE, RO)asset allocation (EE, RO)

returns volatility (standard deviation) the returns volatility (standard deviation) the biggest in BG, CR, POL; 2008 year increased biggest in BG, CR, POL; 2008 year increased it considerablyit considerably

66

Accumulated rates of return as of end of Feb 2009 vs maturity of the pension systems

52,50%

129,30%

30,12%

15,17%12,01% 13,18% 11,34%

2,11% 4,78%

15,25%

7,00%10,42%

3,44%

63,2%

8,04%

-13,83%-16,95% -15,32%

-22,55%

-11,27% -8,95%

0,15%

-6,02%

5,10%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

Czech

Rep

ublic

Poland

(KNF d

ata)

Croat

ia

Estonia

(fun

ds A

)

Estonia

(fun

ds B

)

Estonia

(fun

ds C

)

Bulgar

ia

Slovak

ia (fu

nds A

)

Slovak

ia (fu

nds B

)

Slovak

ia (fu

nds C

)

Roman

ia (v

olunt

ary)

Roman

ia (m

anda

tory

)

Ret

urn

1

3

5

7

9

11

13

Mat

uri

ty (

year

s)

nominal

real

maturity

2. cont. Returns up till end of Feb 2. cont. Returns up till end of Feb 20092009

77

2. cont. Comparison with stock 2. cont. Comparison with stock markets (as of end Feb 2009)markets (as of end Feb 2009)

Country period from indexmonthly excess

value

Bulgaria July 2004 SOFIX 0,727 Croatia Jan 2003 CROBEX 0,429 Czech Republic (p.a.) Jan 1998 PX-GLOB 0,543 Slovakia funds A Apr 2005 SAX 0,588 Slovakia funds B Apr 2005 SAX 0,642 Slovakia funds C Apr 2005 SAX 0,842 Romania mandat. June 2008 BET 11,027 Romania voluntary Dec 2006 BET 7,943 Poland - KNF data May 2002 WIG 0,553 Poland - all funds June 1999 WIG 0,718 Poland - survived funds June 1999 WIG 0,724

88

33. . Impact of the financial crisisImpact of the financial crisis

32,02%

50,90%

27,56%

47,96%46,94%

33,66%

26,54%

48,28%

22,23%

60,69%

28,94%

9,72%

41,60%

0,56%

44,42%

22,05%

63,24%

-14,52%

14,14%10,39%

7,23%

-79,71%-70,47%

-67,13%-62,45%

-51,67%-51,07%

-19,40%-22,41%

-34,54%

-19,66%

-2,06%

-23,86%-20,80%

-7,61%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

2005 2006 2007 2008 2009 (till end of Feb)

Years

Stock market indices in the CEE countries(nominal rates of return)

Bulgaria (SOFIX)

Romania (BET)

Croatia (CROBEX)

Estonia (TALLIN)

Czech Repbulic (PX-GLOB)

Poland (WIG)

Slovakia (SAX)

99

3. cont. Pension markets in 3. cont. Pension markets in 20082008

Bulgaria Croatia CzechRepublic

Slovakiafunds A

Slovakiafunds B

Slovakiafunds C

Romaniamandat.

Romaniavoluntary

Poland -KNF data

Estoniafunds A

Estoniafunds B

Estoniafunds C

nominal

-26,46%

-9,13%

-5,53%

-11,76%-9,69%

-8,44%

-24,44%

-32,11%

-17,0%

-4,76%

3,39%

-1,30%

-20,76%

-6,55%

0,70%

-7,88%

-5,72%

-2,03%

-19,16%

-27,36%

-14,15%

1,24%

6,39%

3,04%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

Performance of selected CEE pension funds in 2008

nominal

real

1010

44. I. Investment policy and limits nvestment policy and limits – impact on pension results– impact on pension results

most of pension funds in analysed sample most of pension funds in analysed sample run conservative investment strategy as far run conservative investment strategy as far as stock exposure is concerned:as stock exposure is concerned:

Country Index Period from BetaApprox. stock holdings in 2007

Legal stock limits in 2007

Bulgaria Sofix Jul 04 0,150 30% 20% + 5%Croatia Crobex May 02 0,131 > 15% 30%Slovakia - fund A Sax Apr 05 0,078 14-20 % 80%Slovakia - fund B Sax Apr 05 0,064 11-16% 50%Slovakia - fund C Sax Apr 05 0,004 0% 0%Romania - mandatory Bet Jun 08 0,001 10% 50% + 5%Romania - voluntary Bet Dec 07 0,001 - 50% + 5%Poland - knf WIG May 2002 0,316 Poland - all funds WIG June 1999 0,302 Poland - survived funds WIG June 1999 0,302

35-40% 40% + 20%

1111

55. Sharpe ratios. Sharpe ratios mostly negative for short-term rates, local mostly negative for short-term rates, local

bonds and US long-term bonds if measured bonds and US long-term bonds if measured until end of Feb 2009 yet...until end of Feb 2009 yet...

... positive for all local bonds and for ... positive for all local bonds and for unhedged (local currency gains) US long-unhedged (local currency gains) US long-term bondsterm bonds

... and positive for most local short-term ... and positive for most local short-term rates and partly for hedged (USD gains) US rates and partly for hedged (USD gains) US long-term bondslong-term bonds

if the 2008 financial crises is not accounted if the 2008 financial crises is not accounted for (calculation horizon until Dec 2007)for (calculation horizon until Dec 2007)

1212

until end of Feb 2009 Annualized Sharpe Ratios

Country start atlocal short local bonds

US long bonds (hedged)

US long bonds (unhedged)

Bulgaria July 2004 0,212 none 0,468 0,326Croatia Jan 2003 0,304 0,539 0,292 0,047Czech Republic (p.a.) Jan 1998 0,265 none none noneSlovakia funds A Apr 2005 0,989 0,577 0,625 0,098Slovakia funds B Apr 2005 0,956 0,494 0,580 0,065Slovakia funds C Apr 2005 0,169 0,001 0,386 0,077Romania mandat. June 2008 0,766 0,034 0,361 3,445Romania voluntary Dec 2006 1,718 0,873 0,380 0,588Poland - KNF data May 2002 0,122 0,087 0,117 0,058Poland - all funds June 1999 0,010 0,054 0,049 0,034Poland - survived funds June 1999 0,002 0,041 0,052 0,843

until Dec 2007 Annualized Sharpe Ratios

Country start atlocal short local bonds

US long bonds (hedged)

US long bonds (unhedged)

Bulgaria July 2004 1,618 none 0,391 0,729Croatia Jan 2003 0,021 0,617 0,081 0,543Czech Republic (p.a.) Jan 1998 0,154 none none noneSlovakia funds A Apr 2005 0,450 0,436 0,292 0,672Slovakia funds B Apr 2005 0,473 0,424 0,311 0,667Slovakia funds C Apr 2005 0,518 0,334 0,387 0,642Romania mandat. June 2008 none none none noneRomania voluntary Dec 2006 none none none nonePoland - KNF data May 2002 0,881 0,679 0,340 0,719Poland - all funds June 1999 0,405 0,401 0,398 0,577Poland - survived funds June 1999 0,404 0,401 0,400 1,604

1313

6. Results so far - 6. Results so far - accumulated real returns for accumulated real returns for

various cohortsvarious cohorts negative values for all or most cohorts in negative values for all or most cohorts in all countries all countries exceptexcept PL (2005 and earlier), PL (2005 and earlier), mandatory RO, CZ (2003 and earlier)mandatory RO, CZ (2003 and earlier)

the biggest loss for cohort entering in 2008the biggest loss for cohort entering in 2008 -34,7% EE funds A, -29,0% BG, -25,0% EE funds -34,7% EE funds A, -29,0% BG, -25,0% EE funds

B, -23,4% POLB, -23,4% POL „„average” group: -12,5% CR, -13-11% SLO average” group: -12,5% CR, -13-11% SLO

funds A, B, -5,5% CZfunds A, B, -5,5% CZ conservative funds: -7,9% EE [2,37% nom.], -conservative funds: -7,9% EE [2,37% nom.], -

0,7% SL [4,23% nom.],0,7% SL [4,23% nom.], conservative funds not much help for 2008 conservative funds not much help for 2008

disasterdisaster

1414

6. cont. Results so far - 6. cont. Results so far - accumulated real returns...accumulated real returns...

early cohorts (1998-2001): positive, CZ 2-6%, early cohorts (1998-2001): positive, CZ 2-6%, POL 43-63%, POL 43-63%,

medium cohorts (2002-2004): getting worsemedium cohorts (2002-2004): getting worse mostly negative, -22,5% BG (2004), from -13% to mostly negative, -22,5% BG (2004), from -13% to

-23% EE (A, B, C funds), -23% EE (A, B, C funds), relatively positive in CZ (from +3% to -2%)relatively positive in CZ (from +3% to -2%) positive in CRO (+8% in 2004) and POL (from +40% to positive in CRO (+8% in 2004) and POL (from +40% to

+12%)+12%) late cohorts (2005-2007): the worselate cohorts (2005-2007): the worse

severely negative: EE (-25-37% A; -25-28% B, -20-15% severely negative: EE (-25-37% A; -25-28% B, -20-15% C), BG (-25-27%), POL (-21%-10%)C), BG (-25-27%), POL (-21%-10%)

negative: SLO (-11-10,5 A, B), CR (-9,5-5%), CZ (-2,5-5%)negative: SLO (-11-10,5 A, B), CR (-9,5-5%), CZ (-2,5-5%) defendable:defendable: SLO (0,15 to -0,9%, C) SLO (0,15 to -0,9%, C)

1515

Poland: Accumulated rates of return as of end of Feb 2009per cohorts entering labour market in January of each year

66,76%

-10,18%

-14,69%

-6,45%

-19,68%

129,30%

99,22%

30,43%

44,67%

76,25%

14,19%

-0,69%

-21,77%

2,56%

-7,74%

-23,40%

48,74%

63,20%

40,08%

42,91%

12,21%

22,38%

-40% -20% 0% 20% 40% 60% 80% 100% 120% 140%

1999 June

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009 Feb

Cohorts (real)

Cohorts (nominal)

1616

77. General assessment and . General assessment and policy recommendationspolicy recommendations

results obtained so farresults obtained so far not satisfactory in real terms but not satisfactory in real terms but effect of crisis and ... low stock exposure effect of crisis and ... low stock exposure

in the pastin the past until 2008 pension funds on average until 2008 pension funds on average

beat the short-term beat the short-term deposits and deposits and local bonds and most of local short-local bonds and most of local short-term ratesterm rates

time needed to recover (happening time needed to recover (happening recently?)recently?)

1717

77 cont. General assessment cont. General assessment and policy recommendationsand policy recommendations

main drivers of results main drivers of results investment limits but also investment limits but also investment policy (sometimes much lower than investment policy (sometimes much lower than

theoretically admissible) theoretically admissible) system’s maturity and timing with crisissystem’s maturity and timing with crisis

conservative fund not solution if saving in conservative fund not solution if saving in it for long-term during accumulation it for long-term during accumulation periodperiod

it does pay to save more aggressively for a it does pay to save more aggressively for a long time (case of Poland) but properly long time (case of Poland) but properly timed switch to conservative funds a must timed switch to conservative funds a must when approaching retirementwhen approaching retirement

1818

7 cont. General assessment 7 cont. General assessment and policy recommendationsand policy recommendations

main policy recommendations:main policy recommendations: life cycle (conservative!) funds needed but there life cycle (conservative!) funds needed but there

are no magic solution (case of SLO and EE)are no magic solution (case of SLO and EE) what should be the default fund bearing in mind what should be the default fund bearing in mind

behavioural patterns of savers in mandatory pension behavioural patterns of savers in mandatory pension systems?systems?

what should be the „pre-retirement” period? what should be the „pre-retirement” period? how to ensure proper switching mechanism”how to ensure proper switching mechanism”

education to the public about the nature of long-education to the public about the nature of long-term saving and equity premiumterm saving and equity premium

help for investment decisions (multifunds) but alsohelp for investment decisions (multifunds) but also help to discuss with reversal tendencies in funded help to discuss with reversal tendencies in funded

marketsmarkets more elastic investment limits COMBINED WITH more elastic investment limits COMBINED WITH

changes in performance evaluation frameworkschanges in performance evaluation frameworks

1919

LiteratureLiterature Antolin P. (2008). Pension Fund Performance, OECD Working Papers on Insurance and Private Pensions, No. Antolin P. (2008). Pension Fund Performance, OECD Working Papers on Insurance and Private Pensions, No.

20, OECD, 20, OECD, http://www.oecd.org/dataoecd/3/49/41218144.pdfhttp://www.oecd.org/dataoecd/3/49/41218144.pdf Sharpe, W. (1994). ‘Sharpe Ratio’, Journal of Portfolio Management, 21(1), 49-58, available also at: Sharpe, W. (1994). ‘Sharpe Ratio’, Journal of Portfolio Management, 21(1), 49-58, available also at: http://http://

www.stanford.edu/~wfsharpe/art/sr/sr.htmwww.stanford.edu/~wfsharpe/art/sr/sr.htm. . Tapia, W. (2008). Comparing aggregate investment returns in privately managed pension funds, OECD Tapia, W. (2008). Comparing aggregate investment returns in privately managed pension funds, OECD

Working Paper on Insurance and Private Pensions, No. 22, Working Paper on Insurance and Private Pensions, No. 22, http://www.oecd.org/dataoecd/39/5/41408063.pdfhttp://www.oecd.org/dataoecd/39/5/41408063.pdf

Walker E., Iglesias A. (2007). Financial Performance of Pension Fund Systems around the World: An Walker E., Iglesias A. (2007). Financial Performance of Pension Fund Systems around the World: An Exploratory Study, Final Report for OECD – World Bank, November 15, 2007, World Bank project on Exploratory Study, Final Report for OECD – World Bank, November 15, 2007, World Bank project on Investment Performance of Privately Managed Pension Funds, unpublished manuscript.Investment Performance of Privately Managed Pension Funds, unpublished manuscript.

2020

DataData

Sofia Group members inquiry, Sofia Group members inquiry, correspondence with institutions, literature correspondence with institutions, literature and Internet search:and Internet search: pension funds units or returns, pension funds units or returns, TBills and TBonds yields, TBills and TBonds yields, local stock and bond indices, US bond indiceslocal stock and bond indices, US bond indices CPI, pension fees, stock market capitalization CPI, pension fees, stock market capitalization

etc.etc. pension funds returns: industry averages pension funds returns: industry averages

(usually market share weighted average)(usually market share weighted average)

2121

MethodologyMethodology pension returns calculation pension returns calculation

weighted market share averages; weighted market share averages; notnot lagged lagged aggregate weights (Walker, Iglesias, 2007: 10) – aggregate weights (Walker, Iglesias, 2007: 10) – difference should not be important yet (short time difference should not be important yet (short time horizon)horizon)

survivorship bias effect acceptable (Polish OFEs: 0,54 survivorship bias effect acceptable (Polish OFEs: 0,54 bps 1999-Feb2009 for simple averages)bps 1999-Feb2009 for simple averages)

discrete, compoundeddiscrete, compounded TBills and TBonds yields TBills and TBonds yields

wealth index as discussed in Walker, Iglesias (2007: wealth index as discussed in Walker, Iglesias (2007: 7)7)

US long bonds – hedged and unhedged versionsUS long bonds – hedged and unhedged versions stock returnsstock returns

price-weighted index (RO, CR) vs value-weighted price-weighted index (RO, CR) vs value-weighted (BG?, SLO, POL, EE) with dividends effect included(BG?, SLO, POL, EE) with dividends effect included

2222

MethodologyMethodology risk-free rate benchmarks, risk-free rate benchmarks,

classical short-term rates (ex. WIBOR3M)classical short-term rates (ex. WIBOR3M) long-term rates (Walker, Iglesias, 2007)long-term rates (Walker, Iglesias, 2007)

long-term local bonds if availablelong-term local bonds if available US long bonds – hedged and unhedged versionsUS long bonds – hedged and unhedged versions

Sharpe ratios (Sharpe, 1994) – volatility of Sharpe ratios (Sharpe, 1994) – volatility of excessexcess returns returns

risk measuresrisk measures standard deviation of returnsstandard deviation of returns beta values against stock indices beta values against stock indices

2323

Methodology: Methodology: Benchmarks for Benchmarks for pension fundspension funds

stock indices dived by 50-80% in 2008stock indices dived by 50-80% in 2008 price-weighted index (RO, CR) vs value-price-weighted index (RO, CR) vs value-

weighted (BG?, SLO, POL, EE) with dividends weighted (BG?, SLO, POL, EE) with dividends effect includedeffect included

risk-free rate benchmarks, risk-free rate benchmarks, classical short-term rates (ex. WIBOR3M)classical short-term rates (ex. WIBOR3M) long-term rates (Walker, Iglesias, 2007)long-term rates (Walker, Iglesias, 2007)

long-term local bonds if availablelong-term local bonds if available US long bonds – hedged and unhedged versionsUS long bonds – hedged and unhedged versions

2424

Volatility of returnsVolatility of returns

Monthly returns volatilitystandard deviation (in pp) annualized coefficient of variation

Country period from until 2007 until Feb 2009 until 2007 until Feb 2009Bulgaria July 2004 1,33 2,15 0,434 1,230 Croatia Jan 2003 2,78 2,67 1,796 3,104 Czech Republic (p.a.) Jan 1998 1,57 1,83 0,630 0,470 Slovakia funds A Apr 2005 0,42 0,11 0,348 0,546 Slovakia funds B Apr 2005 0,34 0,18 0,291 0,439 Slovakia funds C Apr 2005 0,08 0,11 0,071 0,467 - Romania mandat. June 2008 - 0,77 - 0,243 Romania voluntary Dec 2006 - 1,14 - 0,983 Poland - KNF data May 2002 2,04 2,38 0,597 1,226 Poland - all funds June 1999 2,16 2,36 0,613 0,941 Poland - survived funds June 1999 2,21 2,57 0,623 1,019

2525

GGross vs net results (fees)ross vs net results (fees)

in most cases semi-gross rates of return in most cases semi-gross rates of return (mgmt fee)(mgmt fee)

net rates of return should take into net rates of return should take into account upfront feesaccount upfront fees

* As of July 2009 to be lowered to 0,3%.** To be lowered to 3,5 commencing 2009.*** To be lowered to 186 m PLN pa for assets above 45 bn PLN (equiv of 0,413%).

CountryUfront fee (% contribution)

Mgmt fee (% of NuM pa)

Bulgaria 5,0% 1,00%Croatia 0,8% 0,85%Slovakia 1,0% 0,78%*Romania - mandatory 2,5% 0,60%Romania - voluntary 5,0% 2,40%Poland 7,0%** 0,54%***

2626

IInvestment of pension funds – nvestment of pension funds – impact on capital marketsimpact on capital markets

increasing domestic savings - market increasing domestic savings - market development (size, instruments, maturity)development (size, instruments, maturity) Czech Republic 4,8% of GDP (2007)Czech Republic 4,8% of GDP (2007) Bulgaria 4,1% of GDP (2007)Bulgaria 4,1% of GDP (2007) Croatia 7,7% of GDP, 8% of stock market (2007)Croatia 7,7% of GDP, 8% of stock market (2007) Hungary 11,1% of GDP (2007)Hungary 11,1% of GDP (2007) Romania 0,2% of GDP (2007), 1,8% of stock market Romania 0,2% of GDP (2007), 1,8% of stock market

(2008)(2008) Poland 11,9% GDP (2007), 27,5% of stock market Poland 11,9% GDP (2007), 27,5% of stock market

(2007)(2007)

2008 – stabilizer of local capital markets2008 – stabilizer of local capital markets

2727

Bulgaria: Accumulated rates of return as of end of Feb 2009per cohorts entering labour market in January of each year

-10,75%

11,34%

4,26%

-2,63%

-22,84%

-3,30%

-24,72%

-22,55%

-26,95%

-25,68%

-3,40%

-28,97%

-35% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15%

2004 (since July)

2005

2006

2007

2008

2009 (till end of Feb)

Cohorts (real)

Cohorts (nominal)

Croatia: Accumulated rates of return as of end of Feb 2009per cohorts entering labour market in January of each year

3,90%

30,12%

17,10%

2,59%

3,81%

11,46%

-8,32%

-1,88%

-3,68%

-12,47%

-1,94%

8,04%

-9,57%

-4,99%

-4,81%

-6,67%

-15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35%

2002 (since May)

2003

2004

2005

2006

2007

2008

2009 (till end of Feb)

Cohorts (real)

Cohorts (nominal)

Czech Republic: Accumulated rates of return as of end of Feb 2009per cohorts entering labour market in January of each year

28,33%

11,62%

15,42%

33,47%

23,40%

19,11%

40,94%

52,50%

3,92%

0,70%

7,24%

2,92%

1,13%

2,33%

2,23%

3,44%

5,83%

-5,17%

-5,53%

-1,91%

-4,52%

-2,48%

-10% 0% 10% 20% 30% 40% 50% 60%

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Cohorts (real)

Cohorts (nominal)

Slovakia: Accumulated rates of return as of end of Feb 2009, funds Aper cohorts entering labour market in January of each year

-8,89%

-5,69%

-1,10%

-1,40%

2,11%

-1,59%

-13,07%

-13,16%

-11,27%

-12,78%

-14% -12% -10% -8% -6% -4% -2% 0% 2% 4%

2005 (since April)

2006

2007

2008

2009 (till end of Feb)

Cohorts (real)

Cohorts (nominal)

2828

Bulgaria: Accumulated rates of return as of end of Feb 2009per cohorts entering labour market in January of each year

-10,75%

11,34%

4,26%

-2,63%

-22,84%

-3,30%

-24,72%

-22,55%

-26,95%

-25,68%

-3,40%

-28,97%

-35% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15%

2004 (since July)

2005

2006

2007

2008

2009 (till end of Feb)

Cohorts (real)

Cohorts (nominal)

Croatia: Accumulated rates of return as of end of Feb 2009per cohorts entering labour market in January of each year

3,90%

30,12%

17,10%

2,59%

3,81%

11,46%

-8,32%

-1,88%

-3,68%

-12,47%

-1,94%

8,04%

-9,57%

-4,99%

-4,81%

-6,67%

-15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35%

2002 (since May)

2003

2004

2005

2006

2007

2008

2009 (till end of Feb)

Cohorts (real)

Cohorts (nominal)

Czech Republic: Accumulated rates of return as of end of Feb 2009per cohorts entering labour market in January of each year

28,33%

11,62%

15,42%

33,47%

23,40%

19,11%

40,94%

52,50%

3,92%

0,70%

7,24%

2,92%

1,13%

2,33%

2,23%

3,44%

5,83%

-5,17%

-5,53%

-1,91%

-4,52%

-2,48%

-10% 0% 10% 20% 30% 40% 50% 60%

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Cohorts (real)

Cohorts (nominal)

Slovakia: Accumulated rates of return as of end of Feb 2009, funds Aper cohorts entering labour market in January of each year

-8,89%

-5,69%

-1,10%

-1,40%

2,11%

-1,59%

-13,07%

-13,16%

-11,27%

-12,78%

-14% -12% -10% -8% -6% -4% -2% 0% 2% 4%

2005 (since April)

2006

2007

2008

2009 (till end of Feb)

Cohorts (real)

Cohorts (nominal)

2929

Slovakia: Accumulated rates of return as of end of Feb 2009, funds Bper cohorts entering labour market in January of each year

-6,27%

-2,87%

-0,59%

1,33%

4,78%

-1,08%

-10,47%

-10,67%

-8,95%

-10,36%

-12% -10% -8% -6% -4% -2% 0% 2% 4% 6%

2005 (since April)

2006

2007

2008

2009 (till end of Feb)

Cohorts (real)

Cohorts (nominal)

Slovakia: Accumulated rates of return as of end of Feb 2009, funds Cper cohorts entering labour market in January of each year

4,23%

8,40%

1,15%

12,09%

15,25%

0,65%

-0,09%

-0,66%

0,15%

-0,84%

-2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

2005 (since April)

2006

2007

2008

2009 (till end of Feb)

Cohorts (real)

Cohorts (nominal)

Romania: Accumulated rates of return as of end of Feb 2009, mandatory fundsper cohorts entering labour market in January of each year

3,79%

10,42%

5,10%

1,66%

0% 2% 4% 6% 8% 10% 12%

2008 (since May)

2009 (till end of Feb)

Cohorts (real)

Cohorts (nominal)

Romania: Accumulated rates of return as of end of Feb 2009, voluntary fundsper cohorts entering labour market in January of each year

2,45%

3,72%

4,44%

0,34%

-6,34%

-4,43%

-8% -6% -4% -2% 0% 2% 4% 6%

2007 (since June)

2008

2009 (till end of Feb)

Cohorts (real)

Cohorts (nominal)

3030

Poland: Accumulated rates of return as of end of Feb 2009per cohorts entering labour market in January of each year

66,76%

-10,18%

-14,69%

-6,45%

-19,68%

129,30%

99,22%

30,43%

44,67%

76,25%

14,19%

-0,69%

-21,77%

2,56%

-7,74%

-23,40%

48,74%

63,20%

40,08%

42,91%

12,21%

22,38%

-40% -20% 0% 20% 40% 60% 80% 100% 120% 140%

1999 June

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009 Feb

Cohorts (real)

Cohorts (nominal)

Estonia: Accumulated rates of return as of end of Feb 2009, funds Aper cohorts entering labour market in January of each year

-5,97%

-4,61%

-30,71%

4,98%

-19,06%

-25,82%

14,70%

15,17%

-33,73%

-36,17%

-20,99%

-25,69%

-13,83%

-14,61%

-34,65%

-3,74%

-40% -30% -20% -10% 0% 10% 20%

2002 (since July)

2003

2004

2005

2006

2007

2008

2009 (till end of Feb)

Cohorts (real)

Cohorts (nominal)

Estonia: Accumulated rates of return as of end of Feb 2009, funds Bper cohorts entering labour market in January of each year

-5,30%

-1,68%

-20,51%

2,30%

-13,37%

-16,95%

8,78%

10,13%

-29,08%

-28,54%

-23,00%

-25,16%

-17,60%

-19,02%

-25,04%

-0,79%

-35% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15%

2002 (since July)

2003

2004

2005

2006

2007

2008

2009 (till end of Feb)

Cohorts (real)

Cohorts (nominal)

Estonia: Accumulated rates of return as of end of Feb 2009, funds Cper cohorts entering labour market in January of each year

1,55%

-0,35%

-2,37%

7,13%

-1,08%

-0,61%

10,13%

13,18%

-19,02%

-14,48%

-19,37%

-19,75%

-15,32%

-18,02%

-7,93%

0,55%

-25% -20% -15% -10% -5% 0% 5% 10% 15%

2002 (since July)

2003

2004

2005

2006

2007

2008

2009 (till end of Feb)

Cohorts (real)

Cohorts (nominal)