SLOVAKIA - Slovakia's parliament has approved a controversial pensions bill that is set to come into effect next April.

Under the terms of the bill, second-pillar pension schemes will become mandatory for new employees, some schemes will lose their guarantees and others will be forced to allocate a minimum 20% to risky assets.

Although second-pillar pensions will mandatory for all first-time employees, they will have a chance to opt-out within two years, the government said.

The pension fund range will be extended by an index tracker fund, but, at the same time, all funds except the conservative bonds-only funds will lose their guarantees, which pension fund companies had to grant.

Clients will now be able to split their assets between one guaranteed fund and one other fund - until now, they have been able to choose one fund only.

A change in fees means pension fund companies will no longer be able to levy performance fees in the guarantee funds.

Under revised investment regulations, funds will have the ability to use hold-to-maturity valuation and invest in precious metals, while the growth funds will be required to hold a minimum of 20% in equities.

Industry experts have criticised the latter change as a bad move in a difficult market environment.

Viktor Kouril, chairman of the board at ING Slovakia, told IPE: "Setting the obligatory minimum proportion of risky assets at 20% in the growth/equities fund is absolutely unacceptable and has no place in the pension system."

He criticised that "no proper analysis had been done" prior to the amendments being presented to parliament.

He said the changes were the ruling coalition's sole decision, which failed to include the viewpoints of other political parties.

Kouril added: "We fear that, if the government changes, further changes into the second pillar could be expected, which definitely would not help to maintain the trustworthiness of the system."

In general, however, Kouril said he agreed that "change was needed", and that making the system compulsory and cancelling guarantees had been "the right direction" for the government to take.

The additional cut in fees - already slashed by more than 60% by former prime minister Robert Fico - will be a problem for pension fund companies, which, according to Kouril, were "totally neglected" in the latest reform process.

"The result of which," he said, "is that the interest of providers is not aligned with the interest of clients."

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