We often tend to forget that the little things we do today affect our future! Early withdrawal of a private pension fund account is one of these actions that negatively affects our long-term assets in exchange for a momentary need.

While you always have the choice to meet today’s need instead of tomorrow’s security, it is advisable to think long-term.

Do not break your piggy bank ahead of time!

When we were kids we all saved money in the famous piggy. At that age the biggest concern was which toy to buy, which book or which ice cream flavor. Sure, we had no worries such as buying a house or educating our children. Hence, the piggy was broken without fear and used the money to please ourselves. Contributions to the private pension fund are similar to the savings we put into our piggy bank.

Over the years, we also start saving for our pension based on our work income. Nevertheless, at this point in time, there are many more expenses, such as furnishing a house, buying a car, the last cell phone or laptop, the expenses for children’s education among others. If for each need of liquidity that arises in our daily life we ​​turn to the “pension pig”, we will end up with a big income “gap” that we expect to benefit in our old age.

In order for the individual to think it through, before withdrawing the voluntary pension fund or parts of it and to feel encouraged to keep these savings for the only destination of the retirement age, the law has imposed penalties. In any case, the individual has the right to withdraw his fund or parts of it at any time, ending with either a “truncated” amount of savings or NO amount at all for the pension time, as the case below illustrates:

Seida has saved for 10 years the amount of 10,000 ALL per month in the voluntary pension scheme. It comes a moment when she needs to renovate her house and needs liquidity. She find herself with the possible choices as below:

a) Withdraws 1 million ALL from the accumulated amount and continues with the contributions.

b) Does not withdraw at all from the pension scheme, but is directed to another source and continues to contribute.

The graphic below shows the curves for 30 years of contributions, showing the “gap” in case a)

A return rate of 5% is assumed for the above calculations.

The above figures have illustrative purposes and do not serve as indicators of the performance of funds under the administration of Credins Invest sh.a., the management company of Voluntary Pension Funds and Collective Investment Undertakings.