Unveiling the Czech Pension Reform Proposal

The Czech government has forwarded a pension reform proposal to the House of Deputies. The driving force behind this reform is the growing number of pensioners and a decreasing number of people of productive age contributing to the system. While in 2020, there were 3.5 people of productive age for every senior, by 2050, there will only be two.

The proposed pension reform is intended to offset the anticipated deficits of the pillar from which state pensions are paid. However, there are far more changes, some of which aim to aid those caring for sick family members or other close individuals. The main anticipated changes approved by the government are now on their way to the House of Deputies for further deliberation.

One of the key features of the reform is the later retirement age. Currently set at 65 years, the pension age limit will be broken and affect people from the 1966 year group onwards. The retirement age will be guided by lifespan, growing by two months per year. Individuals will learn when they will retire at the age of 50. The aim is for a person to spend an average of 21.5 years in retirement.

The reform also proposes lower new pensions. From 2026 to 2035, there will be a gradual slowdown in the annual increase of newly granted pensions. Despite this, pensions will continue to grow. Furthermore, there will be changes in child-rearing allowances. The rules for entitlement to child-rearing allowances, which currently amount to 500 crowns for each dependent child, will radically change. It will gradually be replaced by a fictitious family assessment base for future pensioners, with the allowance remaining only for the third and subsequent children.

With this reform, the minimum pension is set to almost double. The basic and percentage assessment of old-age pension will rise from ten to twenty percent of the average wage. The reform also proposes changes for working seniors. They should no longer have their pension increased for additional years worked, but their social insurance rate will drop by 6.5 percent. For example, a wage of twenty thousand would lead to an increase in income of 1300 crowns per month.