Czechia unveils new plans for pension reform

The change, which will see pensions indexed by inflation, has been met with opposition in parliament.


Written by ČTK Published on 18.04.2023 10:25:00 (updated on 18.04.2023) Reading time: 2 minutes

Czech Social Affairs Minister Marian Jurečka presented proposed changes to the pension system Monday, stating that pensions would be indexed by inflation and one-third of the rate of the national real wage increase as of Jan. 1, 2024.

The change aims to eliminate the one-off re-evaluation of pensions, which had caused much controversy earlier this year.

Jurečka also proposed that early retirement would be possible three rather than five years before the regular retirement date. The bonus that will replace the one-off indexation of pensions will be automatically added to the pension.

This bonus will consist of two parts: one will be an equal lump sum for all pensioners, and the other will depend on the volume of the recipient's previous contributions to the pension system.

Jurečka plans to propose an additional condition that applicants must have worked for at least 40 years to be eligible for early retirement.

The labor minister said that he feels disappointed at critics of the plan from opposition members of parliament, such as from the ANO movement. He had asked opposition MPs what complex solutions they could propose but received no answer from them.

According to Jurečka, steps are needed to keep the pension system sustainable. The government plans to unveil a draft package of changes to the entire pension system in May.

The reason for the change is an attempt to prevent the widening of a gap between lower and higher pensions, as happened in 2022 and 2023.

Just two months ago, the government announced tentative plans to raise the retirement age to as high as 68 to people currently under the age of 34. Under the changes, people now in their 50s would retire at 66, and those in their 40s at 67.

Director of Czechia's Social Insurance Department Tomáš Machanec said Monday that the proposed reform "is very important in terms of long-term sustainability," as the benefit to the public coffers will be up to 0.3 percent of GDP a year, which is CZK 20 billion in today's terms.

Jurečka also said that early pensions should be used mainly by people who worked in fields with a higher workload and that government will specify the conditions for them.

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