Pension reform envisages CZK 10,000 basic pension plus bonus for raising children

Illustrative photo: Hana Tichá, Flickr, CC BY-NC 2.0

The Ministry of Labour and Social Affairs this week presented a pension reform proposal, which envisages a basic pension of CZK 10,000 for everyone who has worked for 25 years and has the pension insurance contributions for the required number of years.

Jana Maláčová,  photo: Archive of the Office of the Government of the Czech Republic

The plan was presented on Thursday at a press conference by the Minister of Labour and Social Affairs Jana Maláčová and the chairwoman of the government’s pension committee, Danuše Nerudová.

Within the reform, the current public pension system would be divided into two pillars. One would be used for paying out a basic pension, while the other for the rest of the pension, calculated according to the number of years worked and, in case of women, the number of children raised.

According to Mrs Nerudová, the government should receive the pension reform proposal in February and it should be debated in Parliament soon after. "The basic pension should be introduced as of January 2022,” she said, adding that further steps would be introduced gradually.

Illustrative photo: Gerd Altmann,  Pixabay / CC0

According to Mrs Maláčová, the pension reform proposal is supported by members of the pension committee, which includes representatives of political parties, trade unions, employers and other organizations.

She said they were all united by an effort to prepare for the aging of the Czech society and for the change of the labour market following digitization. She also said preparations for the reform had been delayed due to the coronavirus pandemic.

Along with sustainability, Mrs. Maláčová mentioned two other goals of the reform, namely justice and comprehensibility.

Illustrative photo: Bru-nO,  Pixabay / CC0

As of 2023, a calculator should be available for everyone to work out what their pension should be.

At the same time, a bonus for raising children should also be introduced. The main caregiver should receive a minimum of 500 crowns per child per month. The maximum amount he or she would receive is CZK 1.500. People working in retirement should have a tax advantage.

The Organization for Economic Co-operation and Development (OECD) has recommended the Czech Republic to make changes to the current pension system. Among other things, it called for simplifying the system and paying part of the pension from taxes. It also recommended the Czech government continue to raise the retirement age.

The Minister of Labour and Social Affairs, Michaela Maláčová is against postponing the age limit for retirement, arguing that people in their fifties already have a problem finding a job.