Pension reform has become a hot topic in recent days. It has been approved by the Chamber of Deputies and is still awaiting approval from the Senate and the signature of the President. It should bring a number of changes, including an increase in the retirement age and a reduction in pension growth. What other changes will it bring? Find out in this article.
Our pension system operates on the principle of pay-as-you-go financing. This works by current working individuals (contributors) contributing money to a common fund from which pensions are paid to current pensioners. This means that current income from levy payers is immediately used to pay pensions without being deposited into individual accounts or state funds for later use.
The pension system is then supplemented by voluntary savings for retirement, either through supplementary pension savings or supplementary pension schemes. The way this works is that you send money into the savings account yourself and the state sends you monthly contributions. The amount of the contributions varies based on how much you send into the savings account. For example, if you save CZK 300 a month, the state contribution will be CZK 90. The maximum you will receive from the state is 340 crowns if you save at least 1 700 crowns a month. Another bonus is that you can deduct the contributions from your taxes.
Have you been denied a pension even though you are entitled to one?
Defend yourselves. Describe your problem and send us supporting documents. An attorney who is an expert in that area of law will study the problem and call you with a course of action within 24 hours.
Earlier this month, after long negotiations, the pension reform was approved in the Chamber of Deputies. The Senate has to approve it and the President has to sign it. It should come into force next year and some of the changes should be applied in practice. We will now look at the most important ones:
Currently, the highest retirement age is set at 65. This age applies to all people born after 1971, for whom it is set uniformly. For people born before 1971, the retirement age is also determined on the basis of their exact year of birth, their sex and, for women, the number of children they have raised. Here, therefore, the retirement age ranges from 53 to 65.
So, for example, a woman born in 1942 who has raised 5 children has a retirement age of 53. A childless woman born in the same year has a retirement age of 61 years and 2 months.
Under the pension reform, the retirement age should rise to 67. Specifically, it should increase for those born after 1965, by one month for each additional year. It should then stop at 67 and not increase any further.
In practice, this means that a person born in 1966 will retire at 65 years and one month, a person born in 1967 will retire at 65 years and two months, and so on until 1989, which is capped at 67 years.
Wondering how to apply for an old-age pension? Find the answer in our article.
Pensions are increased annually on the basis of indexation. Valorisation is the process by which pension levels are adjusted based on inflation and average wage growth. Valorisation occurs annually and you can expect to receive a higher pension each January.
Under the pension reform, the growth of pensions is to be slowed so that they do not grow faster than the average wage of a working person. As such, pensions will continue to rise thanks to indexation, but the rate of growth should slow down. It is estimated to slow down by up to CZK 200 per year between 2026 and 2035.
Currently, working pensioners receive pension increases based on days worked. This is to be abolished by the pension reform. However, there is another advantage for working pensioners – the obligation to pay pension contributions on their earnings is to be abolished. This means that their net income will increase by 6.5%.
The minimum pension is determined as the sum of the minimum pension percentage and the basic rate. This year it is CZK 5 170.
The pension reform should increase the minimum pensions. The minimum percentage should correspond to 10% of the current average wage.
Self-employed pensioner – how much do you pay and how much pension do you get? Find out in the next article.
People who have spent part of their working years bringing up children receive an education allowance on top of their pension. It is therefore a kind of compensation for a reduced pension. Currently, the education allowance is set at CZK 500 for each child raised. This amount is part of the percentage of the old-age pension, which means that it should increase as pensions are valorised.
With the pension reform, the child-rearing allowance is to cease to be indexed and fewer people are to be eligible for it. Specifically, from 2027, it is to apply only to women with at least three children. For others, the family care allowance should then be paid. This will be determined as if the woman had been earning the average wage at the time of bringing up the child up to the age of three.
The pension reform is expected to benefit people in so-called ‘demanding professions’. Employers should pay 5% higher contributions for these workers, so that early retirement will be available to them without any reduction. Specifically, this change should apply to people doing jobs falling into the fourth risk category.
What is early retirement without pay and how do I apply for it? Our next article will answer this question.
Currently, spouses pay separate contributions and the amount of their pension is also determined separately. This can go wrong in many cases. For example, a woman who has spent most of her working years bringing up children will get a very low pension. This might not be a problem if her husband provides for her in retirement from his pension. But if the husband is not (for example, he is dead or there has been a divorce), the woman will be left with almost no money.
Pension reform should introduce the possibility for spouses to contribute jointly. This means that the amount of their pension would then also be determined jointly. It should also be possible to apply for this adjustment retrospectively.
The conditions for whether study is taken as compensatory time currently depend on the period when you were studying and your age at the time. Study before 1995 is fully counted if you were under 18. If you were over 18 then only the first 6 years count and 80% of the time. For studies from 1996 to 2009, if you were under 18, it does not count at all. If you were over 18, then only the first 6 years of the 80% count. From 2010 onwards, studies do not count towards your pension at all.
Newly, a successfully completed PhD should also count as compensatory time. However, this should only be the first full-time doctoral studies and only to the extent of the standard length of these studies.
The pension reform brings fundamental changes to our pension system. The most significant of these include a gradual increase in the retirement age and a slowdown in the growth of pensions so that they are no higher than average wages. The reform also brings benefits for working seniors and demanding professions, but it also limits the payment of education benefits and changes the rules for sharing contributions between spouses. The question is whether the proposed changes will be enough and whether we can actually talk about reform. We can also expect to see strife when tradesmen and entrepreneurs who have never been employed and have not paid extra contributions come of retirement age.
Our team of experienced attorneys will help you solve any legal issue. Within 24 hours we’ll evaluate your situation and suggest a step-by-step solution, including all costs. The price for this proposal is only CZK 690, and this is refunded to you when you order service from us.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
In person and online. Just choose the appropriate service or opt for an independent consultation when you are unsure.
