Czech Republic's pension system needs fundamental reforms

Фото: Европейская комиссия

The Czech Republic faces a deep crisis of its pension system caused by changes in the structure of the population. Parliament recently approved increasing the retirement age to 63 years. However, experts believe this will not solve the problem.

Photo: European Commission
A typical Czech woman is in her late fifties and has two children. According to the current system, she can retire earlier then her husband. Latest data on the population structure published by the Faculty of Natural Sciences at the Charles University suggest that she would spend almost one third of her life in retirement receiving state-guaranteed pension.

The population structure has been changing much faster than the pension and health care systems. An academic study has revealed that even the most radical proposal to extend the retirement age to 65 years will only postpone the crisis. In about thirty years, the Czech Republic's public finance will be facing exactly the same situation as now. Tomas Kucera, who is one of the authors of the study, explains the current problems of the population structure in the Czech Republic.

"The main problem is not the number of inhabitants, the most important is quality and quality in demographic sense means age and sex structure of the population. In this respect, the biggest shifts are in age structure, especially the population ageing. We have had now a quite period but now, people born during the war and after the war - Czechoslovakia was very specific, because we had a very high fertility even during war- those people are exaggerating the process of ageing in these days."

A sustainable pension system can exist only if politicians use the extra time they have created by the extension of the retirement age for a fundamental reform. However, such decisions are unpopular and politicians tend to avoid them. Jiri Kral from the Ministry of Labour and Social Affair is extremely sceptical. He says that Czech politicians are unable to negotiate a solution acceptable across the political spectrum, which would survive next general election. He believes that the worst is yet to come - only a deep crisis will make politicians act. Mr. Kucera agrees:

"We are leaving space to politicians to collect their political responsibility and to make the step which they feel is the most proper. But we have to say unfortunately that until now there is very low courage to do these dangerous steps. The main problem is, that politicians are mostly thinking in the horizon of their election period."

The coming generation of pensioners is specific because of the increasing number of the so-called oldest old and high proportion of divorced people and singles who lack family support and depend more on the state. Mr. Kucera has a piece of advice for securing a peaceful old age:

"My personal concept is that children are the best capital, best investment in this time - therefore I have three children, twenty-one, twelve and one. We do not invest into state bonds or anything like that, but into the children."