A recent survey conducted by the research agency MindBridge Consulting for Partners has found that the average Czech needs to have saved up around 1.46 million crowns for a comfortable retirement, with men aiming for an average of 1.8 million and women needing only one million. The survey involved 1000 respondents and found that households with a net monthly income above 45,000 crowns would like around 30 times their monthly income saved up, while those with lower incomes would like about 70 times their monthly income saved up. However, the required absolute amount decreases from 1.8 million to 1.23 million crowns.
According to financial advisor Vladimír Weiss, the amount that people need for retirement is individual and depends on how much they want to maintain their current standard of living. For example, someone earning a monthly average net income of 30,000 crowns who wants to maintain their current lifestyle should have saved up to around 2.5 million crowns by age 65.
Despite the differences in the required amount and the fact that people with lower levels of education and income believe that they do not need to save up an extra amount for retirement, a general pessimism prevails among Czechs, with most not believing that the government can provide them with a dignified standard of living in retirement. This is especially true for younger people who are more aware of the government’s inability to provide a decent income in retirement.
According to the survey, the average estimated retirement income is lower than the actual amount. Younger people aged 18 to 35 estimated that the average monthly pension was 15,823 crowns, only 78 percent of the actual amount. Meanwhile, people aged 50 to 65 estimated the average monthly retirement at 18,541 crowns or around 92 percent of the actual amount. According to the Ministry of Labor’s estimate, the average old-age pension is estimated to be about 20,200 crowns after the extraordinary revaluation in June.
Changes in Retirement Savings
The government is planning to change the retirement savings system next year. In the draft law that is currently before the Chamber of Deputies and which would change some laws related to the development of the financial market and support for old age, the government proposes changes to the provision of the current state contribution. The threshold for receiving the contribution would increase from 300 to 500 crowns, which a person saves each month. The contribution amount should change from 90-230 to 100-340 crowns. Old-age pensioners would no longer be eligible for the contribution.
The government also plans to extend the minimum compulsory savings period for entitlement to the state contribution from five to ten years. Pension companies will also be able to create an alternative participant fund. This new type of fund in supplementary pension insurance is intended to be an alternative to existing participant funds with a dynamic investment strategy.
Long-term investment products, such as stocks, bonds, units in investment funds, balances in bank accounts, or derivative hedging, are intended to serve as an alternative to pension savings. If used for retirement savings, they will have the same tax treatment as pension funds and life insurance.