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29 August 2018

Czechia: ongoing debate about the pensions bill that will increase old age pensions for all

Planned amendments to the pension legislation in Czechia are still pending. The proposals include compensation for citizens that retired long ago with inadequate pension schemes. In the spring of 2018, the social partners came to an agreement with the government and welcomed the cabinet's effort to resolve the situation. Underlying the reforms is the notion that that wages have been growing, so pensions should grow as well.

In June 2018, the lower house of Parliament approved a government proposed amendment to the pensions’ law. This amendment would result in an increase in the generosity of old age pensions for all claimants, with a special focus on retirees over the age of 85. Allied to arguments that more spending is needed anyway on medical care, the increase for people over 85 would be 1,000 crowns (or 40 euro) a month. For all pensioners the increase would be at least 540 crowns per month, in addition to the regular indexation. The cost of this was estimated at some 14.5 billion crowns.

The bill needed approval in the Senate and (later on) the signature of the president. However, the Senate returned the proposed amendment to the pensions’ law to the lower house. The Senate came back with several proposals for changes to the bill. Instead of a special focus on people over the age of 85, senators proposed that the state should provide the increase to all who have been retired for 25 years and more. The government responded with a call for a special session of the Chamber of Deputies in August in order to win approval by the end of August, with the result that it may come into force in January 2019.

According to the Czech Social Security Administration (CSSZ) data, a total of 2.4 million people in the 10.5-million Czech Republic were old-age pension recipients at the end of 2017, and the average monthly pension was 11,850 crowns (or 463 euro). The planned reform was meant to improve the position of people who retired 30 years ago with far lower pensions than those going to new pensioners currently. Although their pensions were adapted in the meantime, they are still low compared with new pensions. In January 2018, the CSSZ paid pensions to 197,007 people over 85.

During the preparations of the draft law, representatives of Czech employers and trade unions agreed with the governmental plan to raise pensions as of 2019. Trade unions and employers however, had stressed the necessity to secure sustainability of the pensions financing in the following years.

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