The Czech Republic is likely to see a big rise in pensions next year due to high prices. According to the Pension Act, if prices rise by 5% or more, the merit part of the pension is to be adjusted by the same proportion.
On Tuesday, the Finance Ministry published a prediction that price rises would accelerate. In the first months of the year, the increase could reach around 7%. Labour Minister Jana Maláčová (ČSSD) said on Tuesday that her ministry is figuring out a solution, but they have to wait for the economic data.
“We will wait for the final confirmation. We will consult with our colleagues in the government on how we will proceed. We still don’t know when we can expect the new government to function,” the minister said. She plans to raise the issue at Wednesday’s meeting of the outgoing cabinet.
Pensions will be increased from January. According to the legal rules, the average old-age pension will rise by CZK 505. Of this, CZK 350 will go to the solidarity part, which is the same for everyone and will amount to CZK 3.900. The rest will boost the merit percentage of the pension, which is calculated according to the number of years of service and the amount of contributions on earnings .At the end of September, 2.86 million people were receiving old-age, disability, and survivors’ pensions from the Czech Social Security Administration.
According to Maláčova all people with pensions will get an extra CZK 300. “When I started talking about it in May this year, everyone shook their heads. We already had those estimates of price increases. At least temporarily, this extra CZK 300 from January will help people,” the minister noted.
Experts are warning that inflation will have a huge impact on pensions and therefore, on state budgets. For example, adding CZK 100 to every pension represents an expenditure of over CZK 1.7 billion in six months. With an extraordinary increase, pensions would rise by a hundred crowns. According to earlier information, 10.6 billion crowns are to be spent next year on the CZK 300 bonus and around 20 billion crowns on the regular valorization.