Pensions will rise by CZK 860 on average beginning in January

The average pension in the Czech Republic will rise slightly more than announced in January. In an updated estimate, the Ministry of Labour and Social Affairs increased the average amount of the regular indexation by CZK 35 to CZK 860.

For each child they raise, 1.5 million elderly people will receive an additional CZK 500 per month. At the time of the September government decree, the average increase in the old-age pension was CZK 825.

However, the average pension has been increasing this year significantly even after the indexations, the last of which, an extraordinary one, took place in September.

“The most accurate indication of how much the average old-age pension will increase in January 2023 will be a comparison between January 2023 and December 2022. This can now be estimated due to the valorization by approximately CZK 860,” ministry spokesman Jakub Augusta said.

In January, there will be a regular valorization, which means that both components of pensions will be increased, i.e., the primary, solidary rate, and the percentage or merit rate.

According to the MLSA’s calculations, a senior citizen with a pension of CZK 13 000 will see an increase of CZK 605 from January. The pension of a senior with CZK 18,000 will increase by CZK 860, and the pension of a senior with CZK 23,000 will increase by CZK 1,115.

Everyone will receive a CZK 140 increase, regardless of how much they receive. The fixed part now amounts to CZK 3,900 and will rise to CZK 4,040.

Each child raised earns a bonus

In addition, the merit assessment will rise by 5.1 percent. While the solidarity assessment is the same for all pensioners and corresponds to ten percent of the average wage, the merit assessment is individual for each pensioner. It reflects the years of service and the amount of the earnings levy.

The higher the earnings in the reference period and the longer the period of insurance, the higher the percentage pension assessment. The minimum pension percentage guaranteed by law is CZK 770 per month.

As always, the Czech Social Security Administration (CSSA) will automatically carry out the January indexation, so you do not need to apply. It is also still the case that pensioners over 85 are paid an extra CZK 1,000 a month, and if someone is 100 or older, they receive an extra CZK 2,000 a month.

Automatically, the retirement pension is increased by the child-rearing allowance for all already retired women. With this upbringing allowance, the average old-age pension should reach CZK 19,500 in January, according to the MLSA.

Old-age, disability, and survivor’s pensions will be indexed from January on. Price increases and half of the increase in real wages raise them. This year, however, pensions have been increased by law three times in total, including an ordinary increase at the beginning of the year and two extraordinary increases in June and September due to high inflation.

It is likely that pensions may be subject to extraordinary increases during next year, given the still high price rises. Extraordinary indexation is possible if prices rise by more than five percent over the reference period.

People can calculate how much their pensions will increase in January for themselves.

“From the current pension, for example, CZK 15,000, subtract this year’s basic assessment, i.e., CZK 3,900. You will get a percentage pension assessment of CZK 11,100. You calculate the adjusted pension as follows: add 140 crowns to the amount of 3,900 crowns and increase the percentage assessment to 11,100 times 1,051 crowns, for a total of 15,707 crowns from January,” calculates pension consultant Martin Kohoutek.

The calculation comes out to exactly CZK 15,706.10, but it is rounded to full crowns.

One-off supplement

Pension increases are already due as of January 1, 2023. As a result, beneficiaries will receive a one-time top-up payment equal to the indexation increase beginning January 1, 2023, and ending the day before their January due date. This top-up will be paid on the same date and in the same manner as the pension increase, the CSSA warned.

Beneficiaries will be informed of the pension indexation in a letter sent to them by the social administration from mid-December to mid-January. The amount of the supplementary payment depends on the amount of the pension and the paycheck. The payment dates of pensions paid by the Social Security Agency are even days from the 2nd to the 24th of the month.

When pensions paid concurrently are increased, the entitlement to a percentage increase of 5.1 percent for each pension is assessed separately.

From January 1, the indexation will also affect partial pensions granted under the so-called EU coordination regulations or international social security treaties. The percentage rate paid for these pensions will also increase by 5.1 percent, with the new introductory rate set at a fractional amount of CZK 4,040, in the ratio of the Czech insurance period to the total insurance period, the Czech Social Security Agency explained.

The pensions newly granted on 1 January will only increase with the next valorization, i.e., from 1 January 2024, or with an extraordinary valorization if the conditions for it are met in 2023, which economists say now seems likely. The introductory rate of pensions granted in 2023 will be CZK 4040.