Czechia president signs pension reform, raising retirement age to 67

The retirement age in the Czech Republic will rise by one month a year until capping at 67, two years higher than now, and from next year, the calculation of new pensions is to be reduced for ten years, under the legislation signed into law on December 13 by President Petr Pavel, Report informs via Brno Daily.

The opposition ANO is promising to abolish a substantial part of what they call the anti-social adjustments in pensions if they come to power.

According to the government, the reforms should ensure that there is enough money for the pensions of the generations who are currently in their thirties and forties. Without the changes, the pension system is forecast to cost as much as 5% of the gross domestic product by mid-century, according to the coalition government, about CZK 350 billion ($14.7 billion) in today’s money.

The opposition argues that the government’s pension amendment is not a reform, but a collection of disparate parametric changes without a common goal. Pensions, they said, cannot lead to a disruption of public finances.

Pavel announced his intention to sign the pension reform in November. “There are not so many options to make the pension system sustainable,” he said at the time. “And it is always possible to slow down. Tightening is much harder. If we tighten a little today, it can only help us in the future.” In October, he and experts agreed that the measures would contribute significantly to the stability of pensions for the next decade.

The retirement age has already been increasing, usually by two months a year for men and four months for women. It was due to reach its current limit of 65 in the 2030s.

Under the reform signed by Pavel, people born after 1988 should retire at 67. The calculation of the new pensions would decrease between 2026 and 2035. Of the amount still fully taken into account up to the first income threshold, 90% would be taken into account after 10 years, and 1.45% would be calculated for years of service, instead of the current 1.5%.

In the government’s amendment, the coalition has reduced the number of workers in demanding professions eligible for early retirement on a full pension, to around a tenth of the 125,000 originally proposed. The option, which is now only available to underground miners, paramedics and firefighters, will now also apply to around 12,000 people in the riskiest category of work. Employers will pay 5 percentage points higher levies. For the roughly 112,000 workers in the third risk category, employers would be required to contribute 4% of their wages to the third pension pillar in individual accounts under the coalition’s forthcoming proposal.

The government’s reform also includes a number of other measures, such as an increase in the minimum pension to one-fifth of the average wage, and changes to the childcare allowance, which will now be paid only for third and subsequent children.