The pension reform, proposed by Labour Minister Marian Jurečka (KDU-ČSL) and approved by the government, deviates from previous plans. Among the most important changes are the increase of the retirement age beyond 65 and the introduction of a minimum pension.
Changes made
The original proposals of Petr Fiala’s party included the establishment of a public fund to support the pension system and the possibility for children to pay 1% of the pension insurance to their parents. These measures would have introduced a merit component into the pension amount based on the number of children and insurance contributions, flanked by a voluntary component in the form of state contributions. However, opposition from other parties prevented the implementation of these changes.
As an alternative to these proposals, the current reform envisages a gradual increase in the retirement age beyond 65, in line with the life expectancy of the population. However, exceptions are made for certain categories of workers in ‘difficult’ professions, such as nurses, glass workers, blacksmiths and others, who will be entitled to early retirement. In addition, there is a 6.5% relief from contributions for pensioners who continue to work and a minimum pension of 20% of the average salary. The latter measure, designed to ensure a decent pension, also includes recognition of time spent caring for family members, gradually replacing the child-raising allowance, which will only be paid from the third child onwards, while for the first two children there will be a calculation of notional earnings equal to the amount of the national average wage for the period of care. From 2027, spouses or registered partners will have the opportunity to voluntarily combine their contributions allowing them to have a shared tax base for pension calculation.
The pension reform aims to benefit the younger generation, especially those in their thirties and forties, by guaranteeing them a decent pension. A further aim is to ensure the sustainability of the pension system in the long term. According to Prime Minister Petr Fiala, the pension budget deficit is currently growing. Without reform measures, it is estimated that by 2050 the deficit could reach CZK 350 billion, equivalent to 5% of the Gross Domestic Product (GDP).
Opposition to pension reform
Following the disapproval of the opposition parties, some proposals were not included in the reform approved on Tuesday, 30 April. Among the excluded changes was the one concerning children’s contribution to their parents’ or grandparents’ health insurance. According to Filip Pertold, advisor to the Ministry of Labour and Social Affairs, such a measure would have generated high costs and could have penalised individuals without children, as well as parents of children with disabilities or other conditions that prevent them from working. Pertold also emphasised the potential risk of family conflicts resulting from the implementation of this proposal. Instead, the government has focused its changes on the calculation of state contributions, which as of this year are paid with a fixed deposit of 500 crowns and more. The aim is to further encourage and support citizens’ participation in this type of pension insurance.
Despite marked opposition to raising the retirement age beyond 65, the government went ahead with the pension reform. The opposition refused to participate in further negotiations on the reform due to disagreements on the proposed changes. Some believe that raising the retirement age is inappropriate for certain professions that require early retirement, as well as for professionals, such as scientists or teachers, who may wish to extend their employment beyond the standard retirement age.
According to Pavla Pivoňka Vaňková (STAN), a member of the Social Committee of the Chamber of Deputies, further changes will continue to be made to the pension system in the coming months. In spite of the criticism and controversy, the government maintains that the priority is to ensure a fairer distribution of pensions and the financial sustainability of the system. However, time will determine the effectiveness and real impact of these reforms on the country’s population and economy.
Sources: https://www.idnes.cz/ https://www.novinky.cz/
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